Reports and Financial Statements as of 31

Transcription

Reports and Financial Statements as of 31 December 2007
lucca - anfiteatro’s square
“Men, not houses, make the city.”
Thomas Fuller (1608 -1661) English historian
For SNAI S.p.A. the land has always been the start and end point of its business
strategy.
It is the truest expression of SNAI’s vision of the central role of the player. The SNAI
Point is like a new version of the town square, both a place to meet and exchange
information and an open space in which to share a passion for sport.
Reports and Financial Statements as of 31-12-2007
Shareholders’ meeting of 15 May 2008
(2nd convocation 30 May 2008)
SNAI S.p.A.
Sede in Porcari (Lucca)
via L. Boccherini 39
Capitale Sociale ¤Euro 60.748.992,20 i.v.
Codice Fiscale n. 00754850154
P. IVA 01729640464
Registro Imprese di Lucca e R.E.A. di Lucca
n. 00754850154
Società soggetta all’attività di direzione e
coordinamento di SNAI Servizi S.r.l.
C.F. 01356590461 - P.IVA 01782510208
Reports and Financial
Convocation notice
(published in “Corriere della Sera” on 11.04.07)
The shareholders are called to a shareholders’ meeting in Porcari (LU) – Via Luigi Boccherini 39 – at 11:00 a.m. Thursday 15
May 2008, for the first call, and if necessary Friday 30 May 2008 for a second call, at the same time and place to discuss and
vote on the following
agenda
1.
2.
3.
4.
5.
Financial Statements at 31 December 2007. Directors’ report on operations. Board of Statutory Auditors' Report. Relative
and consequent resolutions.
Proposal for allocation of profit: related resolutions.
Change in payment for the assignment of auditing as per art. 159 of Italian Legislative Decree no. 58 of 24 February
1998: related resolutions.
Appointment of the Board of Directors after determination of the number of members, term in offices and related remuneration.
Appointment of the Board of Statutory Auditors after determination of their remuneration.
Shareholders may take part in the meeting who are in possession of the “certification” issued in accordance with article 85 of Italian
Legislative Decree no. 58 of 24 February 1998 et seqq., issued by an intermediary who is part of the Monte Titoli S.p.A. centralised
management system.
We would like to remind shareholders – owners of SNAI shares not yet digital – that the rights and options under ownership of
shares can only be exercised after delivery of shareholder certificates to an Intermediary for entry in the centralised management
system under the digitalisation scheme.
With reference to points 4) and 5) on the agenda, it is important to note that the provisions of the company articles of association
are reported in articles 14) “Composition and appointment of the Board of Directors”, 22) “Board of Statutory Auditors” and 23)
“Composition and appointment of the Board of Statutory Auditors”; shareholders who possess a stake equal to that set by the
CONSOB regulations with resolution no. 16319 of 29 January 2008, currently totalling 2.5% of share capital, have the right to
submit lists for the appointment, either alone or with other shareholders. The submitted lists need to be handed in to the company’s
registered office at least fifteen days before the date set for the shareholders’ meeting.
For appointment of the Board of Directors the lists need to have the following attachments:
• information related to the shareholders who submitted them with indication of the total stake held;
• detailed information on the personal and professional characteristics of the candidates;
• a statement from the candidates containing their acceptance of the candidacy, as well as certification of their possession of
the legal requirements, including the requirements for independence, when indicated as independent directors in accordance with
the law or as independent directors in accordance with the code of conduct.
The lists of candidates shall be made available to the public at the company’s registered office, the market management company
and on its Internet website, at least 10 days before the date set for the shareholders’ meeting called to vote on the appointment
of the directors
For the appointment of the Board of Statutory Auditors, at the same time as the list and by the deadline indicated above declarations
must be submitted containing:
• information related to the identity of shareholders who have presented the lists, with indication of the total percentage
held and a certificate showing the ownership of the shareholding in the company;
• a declaration of shareholders other than those who hold, including jointly, a controlling or relative majority shareholding,
certifying the absence of connections with the latter;
• complete information on the personal and professional characteristics of the candidates as well as a declaration of the candidates
themselves, certifying that they are in possession of the legal requirements and their acceptance of the candidacy.
Within 10 days from the shareholders’ meeting called to vote on the appointment of the Board of Statutory Auditors, the company
shall make the list of candidates public at the company’s registered office, the market management company and on its website.
If by the date of the deadline for presenting the list only one list has been filed, or only lists presented by shareholders connected
to each other in accordance with the law, lists may be presented up to the 5th day following that date, without prejudice to the
current laws regarding filing and publication. In that case the deadlines for presenting the lists shall be reduced by half.
Additional element for the appointment of the Board of Directors and Board of Statutory Auditors are reported in the articles 14),
22) and 23) of the Articles of Association available on the company website. www.snai.it
The documents related to the topics on the agenda, as required by current law, shall be made available to the shareholders and
corporate bodies at the registered office in Porcari during the fifteen days before the shareholders’ meeting.
Shareholders have the right to obtain a copy.
For the Board of Directors
The Chairman: Maurizio Ughi
CONTENTS
•
•
•
•
•
SNAI S.p.A. CORPORATE BODIES AND INDEPENDENT AUDITORS
GRAPHIC REPRESENTATION OF MAIN EQUITY INVESTMENTS AT 31 DECEMBER 2007
KEY FIGURES
EXPLANATORY NOTES TO THE KEY FIGURES TABLE
DIRECTORS REPORT ON OPERATIONS FOR THE COMPANY AND GROUP
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INTRODUCTION
A. Operating CONTEXT:
1. TREND OF THE GAMING AND BETTING MARKET
SNAI: MARKET SHARES
1.2 COMPUTERISED COLLECTION
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B.
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EXTRAORDINARY OPERATIONS: significant events
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1.
NEW POINTS OF SALE AFTER AWARDING OF 5,092
LICENCES FOR ACCEPTING BETS
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2. REPORT OF THE AUDIT OFFICE AND ADMINISTRATIVE DISPUTES
FOR PRESUMED BREACH IN MANAGEMENT OF THE INTERCONNECTION
OF THE COMPUTERISED NETWORK FOR AMUSEMENT MACHINES
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3. EUROPEAN HIGH COURT OF JUSTICE – DISPUTED RENEWAL OF HISTORICAL
HORSE RACING CONCESSIONS
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4. CALL FOR TENDERS “SELECTION PROCEDURE FOR ASSIGNMENT OF CONCESSION TO RUN AND
DEVELOP NATIONAL TOTALISATOR NUMERIC GAMING”
SO-CALLED SUPERENALOTTO
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5. SLOT – PREVENTIVE CONFISCATION DECREE FORMER ARTICLE 321 OF THE ITALIAN CODE
OF CRIMINAL PROCEDURE
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6. PETITION ON PROCEDURES FOR RECOGNISING REVENUE
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7. NEW ADVERTISING CAMPAIGN
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8. PROGRAMMES DRAFTED BY THE COMPANY RELATED TO COMPANY BRANCHES
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9. INCREASE IN SNAI S.P.A. SHARE CAPITAL
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10. ENHANCEMENT OF REAL ESTATE ASSETS
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11. OPTION FOR ITALIAN FISCAL CONSOLIDATION
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C. ORDINARY OPERATIONS
1. SERVICE PROVIDER LICENSEE ACTIVITY
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2. RESEARCH & DEVELOPMENT
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3.
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QUALITY CERTIFICATION
D. OVERVIEW OF PARENT COMPANY PROFIT, LOSS, ASSETS, LIABILITIES AND CASH FLOW
SNAI S.p.A.: 2007 INCOME STATEMENT
SNAI S.p.A.: Balance sheet AT 31 DECEMBER 2007
SNAI S.p.A.: CASH FLOW STATEMENT
SNAI S.p.A.: NET FINANCIAL POSITION AT 31.12.2007
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E.
OVERVIEW OF GRUPPO SNAI CONSOLIDATED PROFIT, LOSS, ASSETS, LIABILITIES AND CASH FLOW
GRUPPO SNAI: 2007 CONSOLIDATED INCOME STATEMENT
GRUPPO SNAI: CONSOLIDATED BALANCE SHEET AT 31.12.2007
GRUPPO SNAI: CONSOLIDATED CASH FLOW STATEMENT
GRUPPO SNAI: NET FINANCIAL POSITION AT 31.12.2007
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F.
RECONCILIATION STATEMENT BETWEEN PROFIT/LOSS FOR YEAR CLOSED
AT 31.12.2007 AND GROUP’S SHAREHOLDERS’ EQUITY WITH SAME PARENT COMPANY VALUES
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G. OPERATIONS OF SNAI S.P.A. AND GROUP COMPANIES
1. SNAI S.P.A.
2.
2.1
2.2
2.3
2.4
OPERATING SUBSIDIARIES
Festa sRL
SOCIETA’ TRENNO SRL
IMMOBILIARE VALCARENGA SRL
MAC HORSE SRL
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3. DIRECT ASSOCIATES
3.1 SOCIETA’ GESTIONE CAPANNELLE SPA
3.2 ALFEA SPA – SOCIETA’ PISANA PER LE CORSE DEI CAVALLI
3.3 SOLAR SA
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4. OTHER EQUITY INVESTMENTS
4.1 CONNEXT S.R.L.
4.2 TIVU’ PIU’ SPA IN LIQUIDAtion
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H. TRANSACTIONS WITH SUBSIDIARIES, ASSOCIATEs, PARENT COMPANIES AND
CONTROLLED BY PARENT COMPANY
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I.
FINANCIAL STATEMENT AUDITING
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J.
HUMAN RESOURCES AND INDUSTRIAL RELATIONS
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K.
L.
HEALTH AND SAFETY IN THE WORKPLACE
RELATIONS WITH RELATED PARTIES AND CORPORATE BODIES
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M. SHAREHOLDING OF DIRECTORS, STATUTORY AUDITORS AND MANAGING DIRECTOR
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N. ADOPTION OF IFRS – INTERNATIONAL FINANCE REPORTING
STANDARD
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O. BUSINESS OUTLOOK AND SUBSEQUENT EVENTS
1. BUSINESS PLAN 2008-2012
2. NOTES RELATED TO DATA SECURITY POLICY DOCUMENT
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P.
OTHER INFORMATION IN ACCORDANCE WITH ART. 2428 OF THE ITALIAN CIVIL
CODE AND ART. 40 OF ITALIAN LEGISLATIVE DECREE 127
Q. BOARD OF DIRECTOR’S PROPOSALS TO THE SHAREHOLDERS’ MEETING
1. APPROVAL OF THE DIRECTORS’ REPORT ON OPERATIONS,
FINANCIAL STATEMENTS AND PROPOSAL OF ALLOCATION OF
PROFIT
2. VARIATION IN REMUNERATION FOR THE OFFICE OF AUDITOR
ART. 159 OF LEGISLATIVE DECREE NO. 58 OF 24 FEBRUARY 1998:
RELATED RESOLUTIONS
3. APPOINTMENT OF THE BOARD OF DIRECTORS
4. NOMINATION OF THE BOARD OF STATUTORY AUDITORS
ATTACHMENT 1: SNAI S.P.A. – COMPARISON TABLE OF PROFIT AND LOSS VALUES
FINANCIAL YEAR 2007 - 2006
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SNAI S.P.A.: DRAFT OF FINANCIAL STATEMENTS AT 31 DECEMBER 2007 AND EXPLANATORY NOTES
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1.
2.
-
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2007 INCOME STATEMENT
BALANCE SHEET AT 31.12.2007
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY AT 31.12.2007
CASH FLOW STATEMENT
EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING STANDARDS
AGREEMENTS FOR CONCESSION SERVICES
EXPLANATORY NOTES FOR THE MAIN INCOME STATEMENT ITEMS
EXPLANATORY NOTES FOR THE MAIN BALANCE SHEET ITEMS
OTHER SUPPLEMENTARY INFORMATION:
ATTACHMENT 1:
Breakdown of Equity Investments with changes for the year
ATTACHMENT 2.1:
List of subsidiaries
ATTACHMENT 2.2:
List of associates and other equity investments
ATTACHMENT 3:
Breakdown of remuneration to directors, statutory auditors and general managers
ATTACHMENT 4:
Financial statements of parent company SNAI Servizi S.r.l.
ATTACHMENT 5:
Breakdown of available reserves
ATTACHMENT 6:
Information regarding real estate holdings of Gruppo SNAI
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57
57
67
67
76
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CERTIFICATION IN ACCORDANCE WITH ARTICLE 81-ter
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FINANCIAL STATEMENTS OF SUBSIDIARIES AND ASSOCIATES:
ATTACHMENT
TRENNO S.R.L.
ATTACHMENT
FESTA S.R.L. Unipersonale
ATTACHMENT
Mac Horse S.r.l. unipersonale
ATTACHMENT
IMMOBILIARE VALCARENGA S.R.L.
ATTACHMENT
RISTOMISTO S.R.L. in liquidation
ATTACHMENT
TESEO S.R.L. in liquidation
Statement summarising key figures from the last financial statements of associates
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INDEPENDENT AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS
GRUPPO SNAI: CONSOLIDATED FINANCIAL STATEMENTS AT 31.12.2007 AND EXPLANATORY NOTES
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PG. 141
2007 CONSOLIDATED INCOME STATEMENT
CONSOLIDATED BALANCE SHEET AT 31.12.2007
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY
CONSOLIDATED CASH FLOW STATEMENT
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
SIGNIFICANT ACCOUNTING STANDARDS
2.
AGREEMENTS FOR CONCESSION SERVICES
SECTOR REPORT
EXPLANATORY NOTES FOR THE MAIN INCOME STATEMENT ITEMS
EXPLANATORY NOTES FOR THE MAIN BALANCE SHEET ITEMS
ATTACHMENT 1:
Composition of Gruppo SNAI at 31.12.2007
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CERTIFICATION IN ACCORDANCE WITH ARTICLE 81-ter
THE BOARD OF STATUTORY AUDITORS' REPORT.
INDEPENDENT AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
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LEGENDA
AAMS (Amministrazione Autonoma dei Monopoli di Stato) Board of State Monopolies
AGENZIA DELLE ENTRATE (Internal Revenue Service)
ENASARCO (Ente Nazionale di Assistenza per gli Agenti e i Rappresentanti di Commercio) National Social Security Agency for
Commercial Agents.
CORTE DEI CONTI State Audit Court
ENPALS (Ente Nazionale di Previdenza e di Assistenza per i Lavoratori dello Spettacolo) National Social Security and Assistance
for Workers in the entertainment business
INAIL (Istituto Nazionale per l'Assicurazione contro gli Infortuni sul Lavoro)
National Institute for Insurance against Injuries in the Workplace
INPS (Istituto Nazionale della Previdenza Sociale) National Social Security Agency
MINISTERO DELLE FINANZE. Ministry of Finance.
MINISTERO DELLE POLITICHE AGRICOLE ALIMENTARI E FORESTALI. Ministry of Policy for Food, Agriculture and Forests
PREU (Prelievo erariale unico) Inland Revenue Tax on Gaming Proceeds
PREVINDAI (Fondo pensione dei dirigenti industriali) Retirement Fond for Industrial Managers.
SOGEI (Società di Information and Communication Technology del Ministero dell'Economia e delle Finanze)
Society of Information and Communication Technology of the Ministry of Economy and Finances.
T.A.R. (Tribunale Amministrativo Regionale) Regional Administrative Court
U.N.I.R.E. (Unione Nazionale per l'Incremento delle Razze Equine)
National Agency for the Development and Growth of Equine Breeds
CORPORATE AND AUDIT BODIES OF SNAI S.p.A.
(in office since the Shareholders’ Meeting of 11 May 2005)
Board of Directors
Chairman
Maurizio Ughi
Vice Chairman
Francesco Ginestra
Directors
*
*
*
Managing Director
Board of Statutory Auditors
Francesco Cioffi
Claudio Corradini
Alberto Lucchi
Alessandro Mecacci
Paolo Rossi
Pasquale Losco
Andrea Siano
Luciano Garza
Chairman
Francesco Lerro
Standing Auditors
Lorenzo Ferrigno
Alessandro Carlotti
Auditing Company
Reconta Ernst & Young S.p.A.
* Member of the Internal Audit Committee whose chairman is Andrea Siano.
The powers granted to the member of the Board of Directors are described in paragraph N of the Directors’ Report on Operations.
pag
11
Gruppo SNAI: Main equity investments at 31 December 2007
AGENCIES
SNAI SERVIZI S.r.l.
50,68%
SNAI S.p.A.
80,50%
19,50%
100%
100%
100%
100%
100%
70%
30%
TELEIPPICA S.r.l. FESTA S.r.l.
30%
IMMOBILIARE
SOCIETA’
VALCARENGA TRENNO S.r.l.
26,67%
MAC HORSE S.r.l. RISTO MISTO S.r.l.
in liquidation
30,70%
15%
2,4435%
TESEO S.r.l.
in liquidation
19,50%
80,50%
SOLAR S.A.
SOCIETA’ GESTIONE
CAPANELLE S.p.A.
ALFEA S.r.l.
CONNEXT S.r.l.
LEXORFIN S.r.l.
TIVU+
in liquidation
and estimated
realisation value
pag
12
IV. KEY FIGURES
IAS/IFRS accounting standards
(in thousands of euro)
SNAI S.p.A.
Revenue
EBITDA Operating Income
Depreciation and amortisation
EBITDA (Net operating income)
Profit (loss) for period
Changes in investments in property,
plant and equipment and intangible assets
g) Financial investments
a)
b)
c)
d)
e)
f)
h)
i)
j)
k)
l)
Net invested capital
Net financial (liquid assets) borrowing
Shareholders' equity
Distributed dividends:
- total
- Euro/per share
Employees
2007
s)
t)
u)
v)
2005
2004
2003
476.454
76.155
38.060
38.094
5.829
215.837
59.040
31.165
27.876
-1.992
61.912
14.950
5.208
9.742
11.899
51.947
48.416
8.197
8.223
7.621
8.529
6.109
8.306
142.304
534
460.278
4.161
3.014
0
1.808
505
1.361
1.101
566.431
236.621
329.810
425.810
108.506
322.471
82.488
29.764
52.723
71.835
26.866
44.969
72.734
35.386
37.348
212
201
187
177
175
EBIT/revenue
Investments/revenue
EBITDA/Net invested capital
Net financial (liquid assets)
borrowing/Shareholders' equity
m)
n)
o)
p)
q)
r)
2006
Italian accounting standards
8,0%
29,9%
6,7%
12,9%
213,3%
6,5%
15,7%
4,9%
11,8%
15,8%
3,5%
11,4%
12,6%
2,8%
8,4%
71,7%
33,6%
56,5%
59,7%
94,7%
GRUPPO SNAI
Revenue
EBITDA Operating Income
EBITDA (Net operating income)
Investments in property, plant and equipment
and intangible assets
498.298
81.051
39.274
41.777
8.519
222.813
60.685
31.580
29.105
-1.882
85.812
18.130
8.815
9.315
10.351
75.642
71.615
11.248
11.093
7.681
11.939
7.780
8.472
146.198
391.269
6.406
3.695
3.169
Net invested capital
Net financial (liquid assets) borrowing
Employees
566.400
232.714
333.686
465
425.810
102.153
323.657
426
118.771
33.351
85.420
407
83.148
29.562
46.711
401
86.173
40.851
39.071
391
EBIT/revenue
Investments/revenue
EBITDA/Net invested capital
Net financial (liquid assets)
borrowing/Shareholders' equity
pag
8,4%
29,3%
7,4%
13,1%
175,6%
6,8%
10,9%
7,5%
7,8%
14,7%
4,9%
13,3%
10,9%
4,4%
9,0%
69,7%
31,6%
39,0%
63,3%
104,6%
13
EXPLANATORY NOTES TO THE KEY FIGURES TABLE
The table above shows the most significant values of SNAI S.p.A. and Gruppo SNAI related to the financial years from 2004 to
2007.
The values at the letters f), g) and r) only show increased values occurring during the period.
The indexes, shown at the bottom of the value tables, were calculated as follows:
for
•
•
•
•
SNAI S.p.A.
EBIT (Operating income) out of revenue: (value of line d/values of line a) x 100
Investments/revenue: (line f/line a) x 100
EBIT (Operating income)/ net invested capital: (line d/line h) x 100
Net financial borrowing (availability)/shareholders’ equity: (line i/line j) x 100
for
•
•
•
•
Gruppo SNAI
EBIT (Operating income) out of revenue: (value of line p/values of line m) x 100
Investments/revenue: (line r/line m) x 100
EBIT (Operating income)/ net invested capital: (line p/line s) x 100
Net financial borrowing (availability)/shareholders’ equity: (line t/line u) x 100
In compliance with the recommendations on alternative performance measures issued by CESR, “Committee of European Securities
Regulators“, in October 2005, the main indicators used for the reconstruction are shown below:
1.
2.
3.
4.
5.
6.
7.
EBITDA;
EBIT;
Financial Investments (SNAI S.p.A.);
Changes in investments in property, plant and equipment and intangible assets (SNAI S.p.A.);
Investments in property, plant and equipment and intangible assets (Gruppo SNAI);
Net Invested Capital;
Net Borrowing.
1.– 2.
The values of EBITDA (Gross Operating Income) and EBIT (Operating Income) are shown in the income statement
tables in section “D. Overview of parent company profit, loss, assets, liabilities and cash flow” for SNAI S.p.A.
and in section “E. Gruppo SNAI: Over view of profit, loss, assets, liabilities and cash flow” for the Group.
3.
Financial investments for the Parent Company are shown in attachment 1 “Equity Investments” to the Explanatory
Notes for the Parent Company’s Financial Statements;
4.
Changes in Investments in Property, Plant and Equipment and Intangible Assets for the parent company, are the result
of the algebraic sum of the Property, Plant and Equipment and Intangible Assets shown in detail in the Explanatory
Notes in paragraphs 14 and 15;
5.
Investments in property, plant and equipment and intangible assets for Gruppo SNAI are the result of increases in
Property, plant and equipment and intangible assets shown in detail in the Explanatory Noted 15 and 16;
6.
Net Invested Capital is the result of the algebraic sum of:
a. Noncurrent assets (Property, Plant and Equipment, Intangible and Financial);
b. Net current assets (algebraic sum of Inventories, Trade Accounts Receivable and other assets minus Trade Accounts
payable, Provisions for Risks and Charges and other non-financial liabilities);
c. Liabilities for Termination Benefits.
5.
Net Borrowing is calculated as indicated in the table “Net Borrowing – Net Financial Position at 31.12.2007” in
paragraph “D” for SNAI S.p.A. and paragraph “E” for Gruppo SNAI.
pag
14
Directors report on
operations for the Company
and Group
Mantua - Piazza delle Erbe
DIRECTORS’ REPORT ON OPERATIONS FOR THE COMPANY
AND GROUP
Introduction
SNAI S.p.A: is the main operator in the Italian betting market, among the leaders in the national gaming market.
The income from betting on horse racing, sports and new slot machines, performed via the direct and indirect network of SNAI
S.p.A. reached a volume of 4.44 billion euro in 2007.
Net profit of Gruppo SNAI rose from 223 million in 2006 to 498 million in 2007.
Ebitda totalled 81.1 million, compared to the 60.7 million of the previous year, Ebit reached 41.8 million compared to the 29.1
million of the previous year.
Profit for the year totalled 8.5 million, against 1.9 million in losses the previous year.
SNAI S.p.A. closed 2007 with a profit of 5.8 million, thanks to an increase in net revenue which reached 476 million (+120.7%)
compared to 216 million in 2006, with an Ebitda totalling 76.2 million (+29%) against 59 in 2006 and an Ebit totalling 38.1
million (36.7%) compared to the 27.9 million of the previous year.
The growth in revenue and profit occurred due to the opening of around 30% of the new shops and points of sale which SNAI
was awarded following the “Bersani” contract, as well as from revenue from 450 horse racing and sports concessions acquired
on 16 March 2006 and increases in income obtained from the new slot machines.
However, this result was penalised by non-recurring costs for a total of 8.8 million including the cost referred to the participation
in the “Call for tenders for awarding Totaliser numeric games”.
Ebitda and Ebit were influenced in part by costs incurred to set up 5,092 points of sale (shops and horse racing and sports corners)
which, including for reasons unrelated to SNAI S.p.A., only starting to produce revenue in the second half of the year.
The structure of overhead costs related to the licensee activity remained basically steady despite the significant increase in points
of sale of its network.
The net financial position of Gruppo SNAI at 31.12.2007 totalled borrowing for 233 million.
As described above, both the statutory and consolidated financial statements were affected in 2007 by events which led to incurring
non-recurring costs for a total of 8.8 million, including:
Values in thousands of euro
Description
Services for participating in the Call for tenders for
awarding of Totalisator numeric games and
debt renegotiation
Accruals to the Provision for Risks and Charges on settlements related
to previous years
Expenses and Fees in sureties for the Call for tenders for awarding
of Totalisator numeric games
TOTAL
Amount
2.987
4.700
1.098
8.785
Lastly, it is important to note that the reporting of revenue of the Parent Company’s statutory income statement and in the Consolidated
one was changed compared to the one for the previous year reporting the change in sports and horse racing bets at fixed and
totaliser odds in sales and service revenue already net of winning and reimbursements paid to betters, single tax and withholding
in favour of U.N.I.R.E. (Association for the Betterment of Horse Breeds).
A summary of the revenue and cost values reported in the same manner as 2006 is shown in attachment 1 of this report.
pag
17
Directors report on operations for the Company and Group
A. OPERATING CONTEXT
1.
Trend of the gaming and betting market
During 2007 the collection from gaming and betting exceeded 41 billion euro, with an increase of 17.51% over 2006, continuing
a growth trend which had led to an increase of 26.53% in 2006 over 2005.
Change in total income from gaming and betting in Italy
Market
Collection
change %
2007
41.192,15
17,51%
2006
35.054,17
26,53%
2005
27.704,21
36,67%
2004
20.270,31
34,05%
2003
15.121,72
-3,13%
2002
15.609,66
7,35%
2001
14.541,13
1,34%
(values in millions of euro)
Analysis of gaming and betting market in Italy
Game – Bet
2007
QM %
2007
New slot
18.072
43,87%
Lotto
6.300
15,29%
Bets
5.338
12,96%
Horse
2.034
4,94%
Sports
2.596
6,30%
Tris – Ippica nazionale
689
1,67%
“Big” totalisator
19
0,05%
Scratch&Win
7.440
18,06%
Superenalotto
1.946
4,73%
Bingo
1.753
4,26%
Concorsi a pronostico
209
0,51%
Totip
5
0,01%
Lotterie
128
0,31%
TOTALE
41.192
2006
15.227
6.588
5.206
2.135
2.281
760
30
3.884
2.000
1.775
274
14
86
35.054
QM %
2006
43,44%
18,79%
14,85%
6,09%
6,51%
2,17%
0,09%
11,08%
5,70%
5,06%
0,78%
0,04%
0,24%
Variazione %
2007 su 2006
18,68%
-4,37%
2,54%
-4,69%
13,79%
-9,34%
-36,62%
91,53%
-2,66%
-1,26%
-23,84%
-62,91%
49,82%
17,51%
2005
10.705
7.315
4.268
2.190
1.470
563
45
1.492
1.981
1.553
314
22
53
27.704
2004
2003
11.689
4.141
2.262
1.284
596
6.938
3.445
2.311
1.102
602
527
1.837
1.542
443
24
67
20.270
226
2.066
1.257
497
31
56
15.122
Values in millions of
Notes 2007
The value of paragraph 7 machines was eliminated because they are not part of public gaming
Part of the values shown come from SNAI sources, part from unofficial public sources and therefore have a statistical and not exact
value.
The tables show how the gaming market is in constant and consistent growth: it is important to point out that the significant increase
from 15 to around 35 million euro, recorded in the period between 2002 and 2006, is mainly due to the gaming segment related
to “new slot machines”, while for 2007 the segment which recorded the greatest increase was Scratch&Win cards.
Last year new slot machines maintained a significant market share, totalling around 43%, and confirmed a general growth trend,
while the sale of “Scratch&Win” cards almost doubled compared to the previous year, conquering a market share of around 18%,
this figure was 11% the previous year.
There are multiple reasons for this strong increase: the expansion of the network, the introduction of cards sold at the price of 10
and 20 euro, with very high possible winnings (up to two million euro) and consequent strong motivation to buy them; the very
high percentage of payback in winnings between 66 and 75% of the income-prize money; and introduction of on-line sales channel.
Lotto recorded a further drop in 2007, totalling 4.3%, confirming a negative trend which started in 2004. This game, which pays
winning of around 50% of total income (but in the absence of so-called “late” numbers this percentage reaches around 40%), it
appears increasingly characterised by a type of “hard core” of affectionate, habitual players, however it has not managed to
change despite the recent introductions of new playing procedures, such as instant win Lotto.
Lotto seems to undergo a kind of “internal competition” at the same points of sale from the instant lotteries, which offer a greater
winning percentage compared to Lotto. Consequently the “Scratch&Win” cards may be better accepted by the
pag
18
public, and also benefit from greater promotion by retailers, since the instant lotteries are more profitable in terms of commission
compared to Lotto.
The collection for horse race and sports bets increased by a total of 2.54% compared to 2006.
In this context, the increase in sports betting is significant, which rose from 2.281 billion euro to 2.596 billion euro (+13.79%):
this type of betting benefited in particular from popularity with a young, informed and competent audience, as well as an increasingly
broader selection of events and types of bets available.
Another aspect in favour of sports betting is constituted by low taxation, which requires only two withholding rates, with an additional
reduction subordinate to an increase in collection. Currently, the average withholding is between 5.5 and 6%: all of this allows a
remuneration to concessions in line with expectations in terms of company and gaming risks, and to propose the public amounts
to allow average winnings between 75 and 80% of the amount played.
This makes it possible to satisfy bettors both with the quality of the betting product and with significant winnings, generating an
increase in gaming collection recorded on a national level.
Horse race bets at betting agencies, totalling 2.034 billion euro, recorded a drop limited to 4.69%, despite an increasingly greater
competition form other types of gaming.
“Ippiche nazionali” horse race betting (vincente, accoppiata, Tris, Quarté and Quinté) played both at betting agencies and at
pools offices/corners, recorded a volume totalling 689 million euro, for a decrease of 9.34% compared to 2006.
In terms of the latter type of gaming, 2007 witnessed the provisions of the Bersani law becoming effective on the betting market:
the “old” network of pools offices has been gradually – to date only in part – replaced by new shops and corners assigned by
calls for tenders in 2006, and this has led to an overall decrease in acceptance points.
It is important to point out that horse race gaming is characterised by tax withholdings which significantly weigh on what is allocated
for prize money, which bring the percentage of winnings to less than 70% of the total collection, causing unpopularity with the
public to the benefit of more profitable types of gaming.
“Concorsi a pronostico” (pools) (Totocalcio, Il Nove and Totogol) and the “Big” type bets (Big Match and Big Race) recorded
significant losses in 2007, totalling –24% and –37%, respectively, serious decreases considering that the total collection values
were already very low.
Again in this case, a “revision” seems necessary, and more importantly a requalification of the product, in part due to the fact that
the Big Race type bets are characterised by a collection of a few thousand euro for bets on “engine” type events (Formula 1 and
Motomondiale) and even lower for contests related to cycling.
Superenalotto recorded a drop of 2.6% n 2007, inverting the positive trend it registered in 2004 and 2006.
Bingo, with 1.753 billion euro in income, remained basically steady (-1.26%) while awaiting start-up of online gaming, an innovation
which, according to expectations, should generate new interest.
Traditional lotteries witnessed significant growth: +49.82% with collection at 128 million euro, the result is mainly tied to the good
results obtained by Lotteria Italia, the most played and the only one combined with a television programme, broadcast during prime
time on the national network on Saturday night.
Totip experienced the last contest of its history on 30 June 2007: the new game intended to replace it has not been introduced
on the market yet. However, it will be distributed by the new “Bersani” decree network.
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19
1.1 SNAI: market shares
Collection in bet acceptance points and SNAI corners
Game or bet
2007
SNAI horse race bets
1.344
Totalis ator bets
1.288
Totalis ator odd bets
29
Fix ed odd bets
28
Tris or Ippica Nazionale bets
171
HORSE RACE GAMING
1.515
Punti SNAI sports bets
1.105
Motorcycle or car fixed odd
Football “concorsi pronostici“
10
“Big” Bets
2
SPORTS GAMING
1.116
SNAI Slot
1.807
TOTAL SNAI
4.439
QM. 2007
2006
1.484
1.432
30
22
174
1.658
1.153
16
8
2
1.179
1.492
4.329
66,08%
24,79%
55,63%
42,56%
4,81%
8,38%
39,53%
10,00%
10,78%
Q.M. 2006
Diff. %
-9,41%Totalizzatore
-10,08%
-2,12%
69,50%
24,37%
23,00%
-2,08%
57,00% -8,64% Punti SNAI
-4,16%
51,20%
-100,00%
2,90%
27,68%
6,50%
-18,30%
45,60%
-5,29%
9,80%
21,10%
12,30%
2,53%
Values in millions
Notes 2007
As of 2007 motorcycle and car bets no longer exist they are with sports bets in a single category:
Fixed odd bets on events other than horse races. The Slot figure should be considered provisionary.
The close of financial year 2007 recorded total collection of gaming for the SNAI network (bets in SNAI points and connected
pools offices, in Bersani Network gaming points, “concorsi a pronostico”, new slots and bingo) totalling 4,439 million euro, for
an increase of 12.30% compared to the 4,329 million euro in 2006, and with a market share corresponding to 10.78%.
Despite the fact that the Bersani law resulted in a significant increase in the number of active competitors on the Italian market in
2007, SNAI maintained its leadership in the horse race and sports gaming segment, and once again, like in 2006, was the
number two concession for new slots.
The total market share, including Lotto, contests, etc. totalled 10.78%, while the 55.63% share for just the horse race gaming
segment was significant. In the sports betting sector, where the presence of competitors is especially high, the market share was
42.56%. Lastly, for the new slots, a market share totalling 10% was recorded.
New slots
As in 2006, again last year the “amusement machines” – new slots turned out to be the market where SNAI recorded the greatest
increase: in fact the collection reached 1,807 million euro, with an increase of 21.1% over 2006.
The reliability of the computerised market and commercial policy undertaken by SNAI made it possible to consolidate its roles as
the number two network concession for the number of connected slots and routed transactions. Results which make it possible to
look with confidence towards the new opportunities which this market will offer with the introduction of “video lotteries” expected
for 2008.
The new slot market is mainly characterised by its transversality: it is able to reach an audience with a very wide age range, both
male and female, and they can be offered in a very diversified type of point of sale (cafes, pubs, etc.) All of this together with the
positive aspect of immediate collection of winnings and emergence of a market which up to two years ago was active illegally,
has made a fast, significant success of this sector possible.
Horse race betting
Betting on horse races performed at SNAI points (betting agencies, pooling offices, “Bersani network” shops and gaming points
– corners) totalled 1,515 million euro in 2007, a volume that was 8.64% lower than the 2006 figure (1,658 million euro). The
market share, as mentioned above, totalled 55.63%.
An analysis of “nazionale ippica” racing collection (vincente, accoppiata, Tris, Quarté and Quinté, which can be played in agencies
and pooling offices) shows a value of 171 million euro, in line with 2006, but with an increase in market share from 23 to 24%.
This figure confirms how a specialised network can provide bettors more reliability, more information, and even greater services
useful for the betting and consequently can lead to an increase in gaming.
In terms of multiple horse race bets with totalisator odds, the collection reached 29 million euro (-2.12%), while fixed odd horse
race bets increased, with 27.7 million euro (+24.37%).
pag
20
Horse race betting has must deal with withholdings (for tax purposes and the horse race industry) which bring winnings to a
percentage less than 70% of collection, making complete satisfaction of bettors difficult. Moreover, there is a scarce appeal and
lack of concrete valid information in the satellite channels dedicated to horse racing, whose contents are managed by Unire
(National association for betterment of horse breeds), the agency in charge of managing the entire Italian horse racing industry.
Horse race gaming is also one of the market segments which has to the biggest problems with competition from other types of
gaming available in Italy: it has not been able to update itself at a time when new gaming procedures have been introduced in
Italy.
However, the horse race sector is a fundamental asset for the gaming market. The example of the French market, shows that horse
race betting, if based on a programme of structured courses, with the right amount of appeal and level of performance, backed
by adequate information channels meeting the needs of the public and subject to a balanced level of taxation can constitute one
of the main segment for Italy’s gaming market. A relaunch project must entail a greater capacity for horse racing attraction, including
by introduction of one or two major racing days, able to compete with the main worldwide events and which can assume a role
of promotional event for a new audience.
Thus a programmed intervention is required by Unire which entails an relative industrial plan in primis of the same Agency; a review
of withholdings for taxes and the horse racing industry, in order to a allocate a higher total gaming collection to winnings than
the current one; increasing of the level of performance and quality of the scheduled races, together with a rational and coordinated
programming which avoids overlapping of races as much as possible; management of horse race television channels which includes
complete, spectacular programming, able to attract the interest of a new audience and met the needs of fans and bettors.
Betting on events other than horse races (“sports betting”)
The new ministerial name for sports betting (“betting on events other than horse races”) merged gaming on Olympic sports, events
connected to engines (Formula 1, Motomondiale and Superbike) and other types of events (the election of Miss Italy, Academy
Awards, Stock Exchange changes, San Remo Music Festival, reality television programmes, etc.) all into a single category.
In this segment SNAI’s collection in 2007 was 4.16% less than 2006, dropping from 1,153 million euro to 1,105 million; its
market share was 42.56%.
Even in this sector SNAI maintained a market leader role, despite the fact that the “Bersani” call for tenders introduced a number
of competitors much higher than in past years, thus leading to a more aggressive competition than in the past.
SNAI demonstrated its ability to maintain the appeal level of its offering to its clients, and once its own acceptance network is
completed, composed of more than 6,000 points, it will be able to propose itself to the market with even greater strength, with
broad possibilities of obtaining increases both in collection volumes and market share.
In this context, the result of a market study conducted by the GPF institute in September 2007 on sports bettors is interesting: a
“portrait” of a young bettor emerged who is involved, skilled, uses betting to test his own ability and knowledge on the subject, a
“fan” but not in an excessive manner, who almost never bets on his own team for some sense of superstition. He is likely to use
Internet and computerised instruments. A bettor who perfectly fits the type of offer SNAI provides, in terms of technology and services,
supporting what was stated in the previous paragraph.
“Concorsi a pronostico” and “Big” totaliser bets
SNAI recorded an increase in the amount of this segment in 2007: 4.81% was collected from concorsi a pronostico compared
to 2.90% in 2006, and 8.38% of “Big” bets against 6.50% in 2006.
Again in this case a revision of the product-game needs to be planned, able to present them in a new light in order to involve
bettors. In this context, SNAI, which was awarded 5,092 licences out of the 16,300 in the call for tenders and out of the total of
13,685 awarded, can have a significant roll in terms of proposals and management.
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21
1.2 Computerised collection
IThe year 2007 made it possible for SNAI to further increase its computerised collection: the increase over 2006, totalled 25.16%,
with collection reaching 133 million, particularly due to sports betting, which increased 32.76% just for the computerised part.
SNAI computerised bets
Type of bet
Computerised horse race
Computerised fix ed odd sports
TOTAL
2.007
41
92
133
2.006
37
69
107
Var. %
10,93%
32,76%
25,16%
2.005
21
24
45
Values in millions
B. EXTRAORDINARY OPERATIONS: SIGNIFICANT EVENTS
After the acquisition of 450 horse racing and sports concessions, finding of financial resources for such acquisition, participation
in the call for tenders to obtain new points of sale for horse racing and sports betting, increase in share capital to finance the
opening of 5092 points, merger of the operating subsidiary Ippodromi S. Siro S.p.A. (formerly Società Trenno S.p.A.) after spinoff of the horse racing business in the newly established Società Sport e Spettacolo Ippico Srl, which then became Società Trenno
Srl, occurring during the course of the previous year, the year 2007 witnessed a consolidation of these significant operations with
the creation of new points of sale following the awarding of the Bersani call for tenders.
At the same time the company got involved in participating in the new call for tenders for totalisator numeric games whose call
for tenders it participated in along with two other leading operators of the Italian market.
1.
New points of sale following awarding of 5,092 licences for accepting bets
In the second half of 2006 SNAI S.p.A, participated in the calls for tenders from the Ministry for the Economy and Finance –
Autonomous Administration of State Monopolies, to enlarge the network for collecting horse racing and sports bets (resulting from
the so-called “Bersani” decree).
SNAI was awarded 5,092 licences totalling 37.2% of the 13,685 assigned licences.
In detail SNAI S.p.A. was awarded:
•
1,206 sports concessions (342 shops and 864 corners);
•
3,886 horse racing concessions (99 shops and 3,787 corners);
The new concessions will expire on 30.6.2016. They will join the 450 concessions already owned by SNAI S.p.A.,that is 218
sports and 232 horse racing concessions.
In brief, SNAI S.p.A. was awarded the following new points of sale:
Type:
Sports
Shop
No. licenses
Payment
(Euro):
Surety
(Euro) :
342
Sports
Corner
864
Horse Racing Horse Racing
Shop
Corner
99
Remote Horse
Racing Bets
Remote
Sports Bets
TOTALE
3.787
1
1
5.094
35.126.962 32.643.904 13.019.731 32.553.854
300.000
300.000
113.944.451
23.940.000 21.600.000
100.000
100.000
91.530.000
7.920.000 37.870.000
SNAI S.p.A. is currently involved in opening the awarded points of sale which should be operative within 18 months from collection
of the concession: for SNAI S.p.A. the timeframe starts from 30 January 2007, the date when the final sureties were delivered,
after which the payment was made for the licences for a total of ¤113,944,451.
pag
22
The following is the situation of openings at the date of the 28 March 2008 Board of Directors’ meeting:
Description
Sport Shops
SNAI rights
Contracts signed
Installations performed
Public Security Licences obtained
New Points of Sale opened
Customer Concessions
Contracts signed
Installations performed
New Points of Sale opened
Sport Points (Corners)
Horse racing shops Horse racing Point (corners)
Total
223
127
134
132
754
636
601
589
58
32
39
39
1739
1170
994
961
2774
1965
1768
1721
70
51
60
214
182
195
12
8
11
25
18
18
321
259
284
With the acquisition of the new concessions SNAI S.p.A. confirmed its role as the main operator of the Italian market, with a
uniform, wide-spread territorial coverage throughout the Country, with a SNAI point for every 10,000 inhabitants.
2. Reports from the Italian Audit Office and administrative disputes for presumed breach in management of the computerised
network for interconnection of amusement machines
SNAI, as licensee for the management of the computerised network for interconnection of amusement machines received in june
2007 a notice from the Regional Public Prosecutor’s Office of the Region of Lazio Audit Office asking it to submit its own inferences
related to an enquiry on possible tax offence.The regional Public Prosecutor charged SNAI, along with three managers from the
AAMS, with inexact fulfilment of some concession obligations and failure to comply with some service levels.
On 16.01.08 Lazio’s Public Prosecutors office at the Audit Office, deciding not to dismiss the case despite the inferences promptly
submitted by SNAI, served SNAI with a lawsuit related to the complaints previously served in June 2007 with an invitation to infer.
The hearing was set for 04.12.08. After and with reference to the enquiry started by the Regional Public Prosecutor at the Audit
Office, AAMS as well, with an act signed by one of the managers involved in the same proceeding started by the Public Prosecutor,
served SNAI and all the other nine licensees with the same breaches, not considering any evaluation on the matter and as a
precautionary measure.
AAMS reserved the right to make a final decision following inferences presented by the licensees. SNAI, as stated above, submitted
its inferences within the deadlines disputing the grounds of the charges. To this end SNAI has already obtained legal opinions
which confirm its position: the disputed sanctions are not applicable and consequently the requested amounts are not due.
The supposed tax offence amounts to around 4.8 billion euro, entirely composed of penalties for the presumed failure to comply
with service levels. SNAI is certain to have completely fulfilled its licensee obligations, the most important being the complete
payment of the Single Withholding (PREU) and concession fee.
The Board of Directors, both based on the legal opinions obtained and the hearing results to date, believe that no type of liability
for the company can emerge from these proceedings, nor will there be negative results of an equity nature.
In terms of the hearing, despite being faced with a lawsuit with the Audit Office, it is important to point out that:
• on 25 July 2005 the second session of the Lazio Regional Court accepted the suspension request submitted by SNAI against
the administrative sanction which ordered payment of penalties for around ¤4.8 billion;
• the merit of the question was then handled by the second session of the Lazio Regional Court in the hearing of 23 January
2008 and with ruling no. 2728/2008 published on 1 April 2008 the Judge fully granted the appeal submitted by SNAI thus
annulling the AAMS’s measure of June 2007. Thus the ruling confirms the suspension measure already granted by the Lazio Regional
Court in July 2007, certifying the complete legality of SNAI’s operations and represents the conclusion of the first judicial degree
which may be followed by a possible appeal before the Council of State.
3. European High Court of Justice – Disputed renewal of Historical Horse Racing concessions
With its ruling of 13 September 2007, the European High Court of Justice declared that the Republic of Italy, having renewed
329 concessions (of which 134 currently directly held by SNAI S.p.A.) for accepting horse race bets, did not fulfil its obligations
under articles 43 and 49 of the EC Treaty which protects the freedom to provide services and freedom of establishment.
In order to determine the conduct that the Italian authorities will adopt to comply with the ruling, it is necessary to consider if the
recent legal changes, which the Court could not take into consideration (Legislative Decree no. 223 of 4 July 2006 converted
with the modifications on Law no. 248 of 4 August 2006, better known as the “Bersani Law”), is clearly provided by the same
Court in the “Placanica” ruling. The breach, ascertained with the above ruling, has been fully rectified by the Italian Authorities,
who have adopted the regulatory framework to the EU law requirements.
pag
23
In fact, the Bersani Law and related implementation regulations have significantly increased, both legally and de facto, the horse
racing gaming network by setting up a large number of new concessions (10,000); which has allowed all operators in possession
of the requirements to access the market at conditions compatible with EU law. Therefore, the Bersani Law, and the call for tenders
implementing it, got around the restrictions that may result from the renewal of 329 horse racing concessions.
Confirming the compatibility of the current regulatory structure, it is necessary to remember that, according to the recent “Placanica”
ruling, in the event of violation of the concession laws which hinder access to the market, the Italian Authorities can remedy this
by offering an appropriate solution with a call for tenders for an adequate number of new concessions. This is what the Italian
government did with the measures described above.
The 13 September 2007 ruling pronounced by the European High Court of Justice, therefore has been greatly overcome in light
of the regulatory framework now applicable to gaming and betting, completely compatible with EU law. It is only due to procedural
reasons, connected to the progression of the trial and its timing, that the measures adopted by the Italian Authorities were not able
to be taken into consideration by the Court.
Thus it is logical to predict that the Italian Authorities will assert the reasons described above at the European Community Commission,
so that it accepts that in the meantime they have remedied the situation, rectifying the disputed violation.
4. Call for tenders “Selection procedure for assignment of concession to run and develop national totalisator numeric games”
so-called Superenalotto
On 6 July 2007 the call for tenders related to the selection procedure for assignment of the concession to run and develop national
totalisator numeric games, called by AAMS was published in the Official Gazette of the Republic of Italy, 5th Special series, no.
78. On 10 August 2007 a specific correction notice containing the errata of the call for tenders documentation, already available
on the AAMS website, was published in the Official Gazette of the Republic of Italy, 5th Special series, no. 93.
SNAI S.p.A. filed the documents for participating in the call for tenders by the 28 September deadline along with two other leading
Italian operators of the sector.
On 28 January AAMS communicated the outcome for the call for tenders to award the concession for totalisator numeric games
– Superenalotto – for the next nine years which ended with awarding of the concession to the company Sisal S.p.A.
The outcome does not affect the business projects of SNAI S.p.A. and Gruppo SNAI which continue along the lines defined in
the industrial plans for licensee and provider activities for the collection of sports and horse racing bets now managed, along with
that of the licensee of the collection network to amusement machines (so-called slot machines).
SNAI S.p.A. has confirmed itself as a leading company on the Italian market for the collection of sports and horse racing bets
and among the main operators of network licensees for connection of amusement machines.
5. Slot – preventive confiscation decree article 321 of the Italian Code of Criminal Procedure
The licensee of the SNAI S.p.A. network, as suggested by its legal consultant to protect against any co-responsibility of the directors,
previously sent formal request to its slot machine manager customers to immediately remove machines of the categories subject to
measures by the Public Prosecutors Office of Venice. The customer managers, despite manifesting their operating and financial
difficulties started the removal and replacement process for the machines which were the subject matter of this measure.
To date the managers connected to the SNAI S.p.A. Licensee network have asked for the collection of 11,064 authorisations related
to the amusement machines deemed not in compliance with the law replacing them with a practically identical number of new
machines which are in compliance.
The voluntary removal process for the machines which are the subject of the confiscation was completed without significant economic
and financial effects for the activity of directly managed amusement machines, in part due to the medium-small type of SNAI
customers.
On 15 June 2007 the judge for preliminary investigation at the Court of Venice issued a preventive confiscation decree for electronic
gaming machines characterised by cards called “Black Slot”, “Stack Slot” and “Terza Dimensione” belonging to the models, located
everywhere in pubs throughout the country, specified in detail in the tables annexed to the decree, since they were deemed
“intrinsically functional to gambling”.
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24
On 28 June 2007 the Public Prosecutors Office at the Court of Venice, represented by deputy Public Prosecutor Giorgio Gava
sent a notice to all managers of electronic gaming machine characterised by the cards called “Black Slot”, “Stack Slot” and “Terza
Dimensione” and with copy to network licensees asking for the immediate removal from pubs located throughout the country, where
they are currently installed and their disposal, warning that the Italian Treasury Police had already been granted to powers for penal
confiscation of all machines which were not removed.
Subsequently, on 4 July 2004, AAMS asked, as requested by deputy Public Prosecutor Gava, the licensees of the computerised
network to proceed, all objections dismissed, with the necessary procedures for disposing of the machines in question. Given the
request of the deputy public prosecutor to give maximum exposure to the Decree in question, AAMS made it available on its website.
The confiscation decree for around 105,000 new slot machines ordered by the judge of the Court of Venice represented a critical
problem for industry operators who were forced to change around 50% of their installed machines in a short time.
SNAI and the network associations for computerised management of legal gaming using amusement machines, A.C.A.D.I. and
ASSOSLOT had asked the government to proclaim a “state of crisis” for the sector consequent to the machine confiscation measure,
called for by the Public Prosecutor’s Office of Venice, supporting interventions later proven not necessary in light of the facts,
regarding:
•
programming and procedures for the replacement of the involved machines, in a period not less than 3-4 months;
•
authorisation to replace the involved machines even by means of upgrading the gaming cards;
•
introduction of support measures for the sector, for example, extensions in the payment of PREU and tax breaks for
replacement of the machine in question;
•
a definitive and certain regulatory system for the sector.
6. Petition on procedures for recognising revenue
Based on a specific petition to the company as per article 11 Law no. 212 of July 2000 and article 3, Ministerial Decree no.
2009 of 26 April 2001, the Italian Tax Authorities – Central Claims Office – Enterprise and Entity tax sector – with document no.
2008/2649 on date 14.01.2008 sent resolution no. 10/F.
This resolution in its detailed format, related to the recognition of negative income components in the Company’s income statement,
concludes that, “of the purposes of the application…of article 75 (editor’s note: now 109) of the Income Tax Act approved by
decree of the President of the republic no. 917 of 22.12.1986, it shall be understood that the expenses and negative items are
recognised on the income statement if and to the extent that they are entered in the accounting records, they contributed to determining
the net result of the income statement, regardless of specific evidence in that document…”.
Therefore, the income statement for 2007, unlike the one from the last year, objected to by the auditing firm, is presented according
to a model which computes the change in fixed and totalisator odd orders in net revenue, with reimbursements and winnings already
deducted, without the total operating revenue.
However, for additional information, the income statement in compliance with the one from the previous year is attached to the
explanatory notes.
7. New Advertising Campaign
In October 2007 a new advertising campaign was launched programmed for the autumn for print, radio and billboards.
The campaign was created by the Oliviero Toscani team with the specific aim of strengthening the SNAI brand in the betting market
where, following an enlargement of the distribution network, new, important Italian and foreign competitors are entering.
The on-line market is also witnessing the entrance of aggressive new foreign operators with major investments in the specific sector.
The aim of the brand-strengthening campaign, for an investment of over 3 million euro, is aimed at increasing and reconfirming
SNAI as the leader of the betting market in Italy, with simultaneous characterisation of reliability and confidence as well as advanced
technology connected to the rapid evolution phase of the market scenario.
The enlargement of the market will be stimulated also by an increase in exposure and promotion of sports and horse racing betting,
greater social acceptance of places assigned to collecting bet and spread to areas not yet served with a supply of betting.
pag
25
8. Programmes drafted by the company concerning company branches
Company Branches which have been acquired shall continue to perform, thanks to the activity performed by the former owners
based on management contracts, acceptance and collection of horse racing and sports bets which the former owners performed
before the acquisition.
Therefore, the circumstance that these Company Branches are currently owned by SNAI makes it possible for SNAI to develop
synergic strategies by improving the general efficiency of the Company Branches.
This profile may regard the risk assumed by each Company Branch in accepting and collecting bets related to a certain event,
since currently this risk can be balanced by the acceptance and collection of bets of an opposite sign related to the same event,
due to the typical preferences of bettors differentiated by geographic area.
In addition to this SNAI, with its consolidated experience in the sector, will be able to provide specific directives to the various
SNAI Points based on Management Contracts, thus improving their ef ficiency and quality standards.
Moreover, following the awarding of new points of sale for horse racing and sports betting after the call for tenders required by
Italian Law 248 of 2.8.06 converting Italian Legislative Decree no. 223 of July 2006 the so-called Bersani Law, SNAI assigned
Punti SNAI managers, using specific contracts, the territorial supervision of new points with the assignment to search for and sign
contracts for the best locations in the country for shops and points of sale (corners), to train sales assistances and supervise the
regular performance of collecting bets and paying winnings.
9. Increase in SNAI S.p.A. share capital
The “Shareholders’ equity” paragraph in the explanatory notes, which this comment is based on, analytically describes the various
voting and executive phases of the share capital increase process up to ¤250 million between nominal and share premium.
The transactions which occurred in the first half of 2007 are summarised below along with the outcomes and changes in the quantity
and value of all the share capital increase transaction of the parent company SNAI S.p.A.
The uncalled options, totalling 525,025, were offered on the Stock Exchange by the Company, in keeping with the provisions of
article 2441 paragraph 3 of the Italian Civil Code, by UniCredit Banca Mobiliare S.p.A. from 8 to 12 January 2007.
The new option rights were all sold and exercised by subscription, by the final deadline of 15 January 2007, for 588,028 newly
issued shares for a value of 2,381,513.40 euro.
The transaction was concluded in January 2007 with the entire subscription of the 61,718,860 shares offered for a total value
of 249,961,393.00 euro.
As of 30.06.2007 the entirely subscribed and paid-up share capital of SNAI S.p.A. amounted to 60,748,992.20 euro and is
subdivided into 116,824,685 ordinary shares each having a nominal value of 0.52 euro.
As of 31.12.06 the entirely subscribed and paid-up share capital of SNAI S.p.A. amounted to 60,443,321.04 euro (at 31
December 2005 28,570,454 euro) and is subdivided into 116,236,957 ordinary shares (54,943,180 ordinary shares at 31
December 2005).
Holders of ordinary shares have the right to receive dividends voted on a time to time basis, and for each share held they have
one vote to express in the shareholders’ meeting.
number of authorised shares
number of shares issued and entirely paid in
nominal value
116.824.985
116.824.985
0,52
pag
26
The table below shows a reconciliation between the number of shares in circulation at the beginning of 2006 and at the end of
the period.
Description
Share Capital at 1.1.2006
Increase in Share Capital due to merger swap
of the subsidiary Ippodromi San Siro S.p.A.
(formerly TRENNO S.p.A.) in SNAI S.p.A.
Increase of Share Capital subscribed
and paid in at 31.12.2006
Increase in Share Capital subscribed
and paid in at 15.01.2007 following sale
on Stock Exchange of 525,025 uncalled options
No. shares
54.943.180
Share capital value (euro)
28.570.453,60
162.945
Value of option rights
-
84.731,40
-
61.130.832
31.788.032,64
-
588.028
116.824.985
305.774,56
60.748.992,20
1.667.727,88 (*)
(*) revenue from the sale of uncalled options was acquired by the issuing company SNAI S.p.A
The issued shares are all ordinary shares without any constraints or preferences. There is no treasury stock held directly by the issuer
SNAI S.p.A. or through its subsidiaries or associates.
10. Enhancement of real estate assets
During the 2004 financial year the Monuments and Fine Arts Office formally place a historical – artistic interest constraint on part
of the areas of the Milan San Siro race track, owned by SNAI S.p.A. and companies which are part of Gruppo SNAI.
Opposed to this proceeding, with the assistance of Group consultants, the involved companies appealed promptly to the Regional
Administrative Court of Lombardy.
Additional initiatives to undertake to enhance the landmark complex, and at the same time protect the buildings which in the
meantime have become the property of SNAI S.p.A. are being examined by the Board of Directors.
It is a known fact that on 31 March 2008 the city of Milan was awarded the organisation of Expo 2015 which will involve urban
replanning and enhancement of large areas within the city including those of the Milan San Siro area.
On 15 May 2007 an advisor contract was signed with connected acquisition option pact with the company VARO S.r.l., which
operates in the real estate design and consultation market, to enhance the areas of the Milano San Siro complex.
The acquisition option, which has a duration until 31 January 2012, includes all the area with the exception of the Gallop race
track.
11. Option for Italian Fiscal Consolidation
During financial year 2006, in part in relation to the programmed and performed corporate and group restructuring operations
with implementation of the merger project of the company TRENNO S.p.A., former spin-off of the Gestione Ippica company branch
with the parent company SNAI S.p.A., the administrative bodies of SNAI S.p.A., TRENNO S.r.l., MacHorse S.r.l., Festa S.r.l.
and Immobiliare Valcarenga S.r.l. exercised the three year option to make avail of the “Italian Fiscal Consolidation” starting 1
January 2006 based on the articles of Italian Presidential Decree no. 917 of 22 December 1986 et seqq.
Consequently, both the transfer or real estate complexes and the SNAI S.p.A. merger with TRENNO S.p.A. occurring during 2006
were fiscally considered within the framework of that law.
pag
27
C. ORDINARY OPERATIONS
1. Concessionary activities and service providers
During 2007 the direct licensee activity for 450 concessions, performed since 16 March 2006, was added to that resulting from
the opening of new points of sale awarded with the Bersani call for tenders which opened gradually starting in the month of April
and continued during the year, some are still in the opening phase.
SNAI S.p.A. has confirmed its leading role in the horse racing and sports betting sector with a share totalling 10.78% of the entire
gaming and betting market, reaching a market share of 55.6% for horse racing gaming and 39.5% for sports gaming.
The total volume of gaming and betting in Italy reached 41.2 billion euro in Italy during 2007 for a growth of 17.51% compared
to the values realised in 2006.
The most significant increases include those related to sports betting (+13.79%) and those of New Slots (+18.68%), both segments
in which Gruppo SNAI operates.
Instead horse racing betting witnessed a drop, another sector where the Company and group operate in a significant manner: in
particular those related to totalisator (-4,69%), ippica nazionale (-9.34) and to “Big” contests (-36.62%).
It is important to point out the significant growth realised by the sports betting segment, which on a national level reached 2,596
million euro, in part thanks to the opening of new points under the “Bersani” call for tenders.
In fact, some competitors made new points of sale operative in very short timeframes, thanks to contractual relations already
established with managers of points of sale which then became Bersani licenses. SNAI, in contrast, had to select and sign contracts
with its sports and horse racing corners, while the old concessions for “concorsi a pronostico” were extended (until 31.12.2007).
This situation, in the initial new corner opening phase, penalised the growth in SNAI volumes, which in the current 2008 financial
year, with the continuation of opening of new points of sale both corporate and those of customers who have selected SNAI as
provider, will permit a gradual recovery of both volumes and market share.
The company also has a consolidated position in other market segments such as “new slots” (as licensee for the network connection
of machines) which has become a prime activity in terms of importance on a national level: in a market segment showing a collection
greater than 18 billion euro, SNAI is the second national operator, with a collection totalling more than 1.8 billion euro. Other
sectors include “concorsi a pronostico” (licensee for collection through betting agencies and network of SNAI points) and bingo
(provider for activation and management of halls).
During the past year, the company consolidated and improved its offering aimed at licensees and consequently, towards the end
customer. SNAI S.p.A. has constantly employed technologies and services aimed at the public, implementing different interventions
which include: better acceptance of betting on non-horse racing and non-sports events (San Remo Music Festival, etc.); sending
of interactive acceptance on betting TV channels, the new Betsi terminal, improvement of bets collected by telephone and internet;
the possibility of live betting on sports events while they are going on; dissemination of the SNAI Gold cards, acceptance of new
horse racing bets (Vincente, accoppiata, quarté and quinté nazionale); implementation of new self-service terminals, called small
and large Punto SNAI Web mainly intended for so-called remote gaming; a complete overhaul of the Internet website, both in
terms of the information part and acceptance of bets.
Thus the strategy, already effective in the previous year, was confirmed mainly based on:
•
Pursuing innovation of services and technologies, to allow an immediate answer to the needs of customers-bettors, needs
in constant evolution, in part based on the generational change in sports betting;
•
Enhancement of own know-how;
•
Constant focus on the customer and end consumer.
SNAI has maintained a continual focus on communication aimed at the customer and end user. Daily, weekly, monthly and quarterly
communication instruments have been improved and developed, which entail sending memos on specific subjects, immediate
information, in-depth coverage of administrative, legislative, fiscal, etc. topics; newsletters with various periodicity dedicated to
the main initiatives created by SNAI, evolution of the regulatory and technological sector, event and sponsorships.
Communication aimed at the customer and end user is backed by public relations and press office activities aimed mainly at the
media and general public: 2007 was additionally enriched with editorial programmes dedicated to the horse racing and sports
betting sector published in national newspapers and on the Internet websites of national journalism publications.
pag
28
2. Research and Development
SNAI S.p.A. and the Group companies sustain the development costs of their core businesses in the sector of specialised hardware
and software products, for network connections and for the supply of services for the collection of bets. The explanatory note to
the statutory and consolidated financial statements describe in detail the expenses incurred for already implemented development
initiatives.
3. Quality Certifications
SNAI S.p.A. obtained the ISO 9001:2000 Quality Certification on 10 November 1999.
With subsequent integrations, the quality certification is currently issued for bet acceptance services, sale to the public of “concorsi
pronostici” and for management of the computerised network for legal gaming.
In its entirety the certification confirms the complete reliability and transparency of the entire production process of SNAI Spa.
D. OVERVIEW OF PARENT COMPANY PROFIT, LOSS, ASSETS, LIABILITIES AND CASH FLOW
The Balance Sheet, Income Statement and Cash Flow Statement tables compare the values at 31.12.2007 with the values at
31.12.2006 in thousands of ¤.
The 2007 company structure includes the direct management of 450 horse racing and sports concessions as of 16 March 2006
and part of the activities resulting from the start-up of the new horse racing and sport points of sale which the company was awarded
at the end of the so-called Bersani call for tenders.
The company also maintains a service provider business for BAP – Bet Acceptance Points – which did not take part in the acquisition
offer of the concession company branch performed in 2006, and for new “Bersani” licence licensees who have selected SNAI
services for the connection to SOGEI.
For an analysis of the individual asset and liability, financial and profit and loss items see the explanatory notes to the Statutory
Financial Statements of SNAI S.p.A. contained in this file.
pag
29
SNAI S.p.A.
Income statement closed at 31 December 2007
values in euro
Revenue from sales and serives
Other revenue and
Increas of internally generated assets
Changes in inventories of finished and semi-finished products
Used raw materials and consumables
Costs for services and leased assets
Personnel expenses
Other operating costs
Ebitda
Depreciation
Ebit
Income and charges from equity
Financial income
Financial charges
Total financial income and charges
PRE-TAX EARNINGS
Income taxes
pag
30
2007
2006
468.954.791
7.498.818
1.325.916
118.563
(12.043.586)
(351.553.117)
(7.867.321)
(30.279.307)
76.154.757
(38.060.348)
38.094.409
266.052
4.731.499
(42.548.034)
(37.550.483)
543.926
5.284.698
5.828.624
210.421.211
5.415.957
520.357
(724.271)
(3.804.854)
(127.287.266)
(15.343.946)
(10.156.927)
59.040.261
(31.164.697)
27.875.564
(62.417)
1.816.990
(30.297.253)
(28.542.680)
(667.116)
(1.324.384)
(1.991.500)
SNAI S.p.A.
Balance sheet at 31 December 2007
values in euro
31/12/2007
31/12/2006
Company owned property, plant and equipment
Assets with finance lease contract
Total property, plant and equipment
120.067.588
16.495.504
136.563.092
113.175.681
3.898.669
117.074.350
Goodwill
Other intangible assets
Total intangible assets
225.110.343
235.801.052
460.911.395
225.110.343
151.047.305
376.157.648
Equity investments in subsidiaries and associates
Equity investments in other companies
Total equity investments
Other financial assets
Prepaid taxes
Other non-financial assets
Total noncurrent assets
5.060.136
588.488
5.648.624
0
13.579.529
2.080.203
618.782.843
4.604.153
542.008
5.146.161
0
10.276.635
1.965.231
510.620.025
Current assets
Inventories
Accounts receivable
Other assets
Current financial assets
Cash and cash equivalents
Available-for-sale noncurrent assets
Total current assets
14.018.366
51.354.586
31.415.667
20.184.616
89.232.071
30.987
206.236.293
14.206.525
48.697.229
13.885.991
6.356.938
253.699.717
0
336.846.400
TOTAL ASSETS
825.019.136
847.466.425
Share capital
Reserves
Total Shareholders Equity
60.748.992
263.232.239
5.828.624
329.809.855
60.443.218
264.019.753
-1.991.500
322.471.471
Noncurrent liabilities
Termination benefits
Noncurrent financial liabilities
Deferred taxes
Provisions for future risks and charges
Noncurrent various payables and other liabilities
Total noncurrent liabilities
1.570.139
313.379.967
43.192.137
7.311.516
13.847.291
379.301.050
4.525.043
313.373.878
51.105.422
2.825.680
19.542.026
391.372.049
Current liabilities
Accounts payable
Other liabilities
Current financial liabilities
Current portion of long term loans
Total financial liabilities
Total current liabilities
27.236.382
56.013.074
13.838.306
18.820.469
32.658.775
115.908.231
27.757.881
50.675.943
43.057.658
12.131.423
55.189.081
133.622.905
825.019.136
847.466.425
ASSETS
Noncurrent assets
LIABILITIES AND SHAREHOLDERS EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
pag
31
SNAI S.p.A.
Cash Flow Statement
values in thousands of euro
A. CASH FLOW FROM OPERATIONS
Net change in assets (provision) for prepaid (deferred) taxes
Change in provision for risks
(Capital gains) capital losses on sale of noncurrent assets (including equity investments)
Portion of equity investment results measured with equity method (-)
Net change in noncurrent trade and other assets and liabilities and other changes
Net change in current trade and other assets and liabilities and other changes
Net change in termination benefits
CASH FLOW GENERATED (ABSORBED) FROM OPERATING ACTIVITIES (A)
B. CASH FLOW FROM INVESTMENT ACTIVITIES
Investments in property, plant and equipment (-)
Investments to acquire company branches (-)
- goodwill
- concessions
- determined payables due to AAMS
- deferred taxes on company branch acquisition
Investments in intangible assets (-)
Investments in other noncurrent assets (-)
Acquisition of equity investments in subsidiaries, net of acquired liquid assets
Change in financial receivables and other financial assets
Payment collected for sale of equity investments in subsidiaries,
net of transferred liquid assets
Payment collected from the sale of property, plant, equipment,
intangible assets and other noncurrrent assets
CASH FLOW GENERATED (ABSORBED) FROM INVESTMENT ACTIVITIES (B)
B1 CASH FLOW GENERATED (ABSORBED) FROM MERGER (B1)
B2 CASH FLOW GENERATED (ABSORBED) FROM TRANSFER (B2)
C. CASH FLOW FROM FINANCIAL ACTIVITIES
Net change in financial liabilities
Loans to acquire “concession” company branches
Payables due to BAP extended to acquire “concession” company branches
Settlement of consolidated bank payable
Payment collected for instruments representing shareholders’ equity
Other S.E. changes
Increases/payments of capital net of accessory charges
Dividends paid to others (including distribution of reserves)
CASH FLOW GENERATED (ABSORBED) FROM FINANCIAL ACTIVITIES (C)
D. CASH FLOW FROM DISPOSED ASSETS/AVAILABLE-FOR-SALE ASSETS
E. TOTAL CASH FLOW (A+B+B1+B2+C+D)
F. INITIAL NET FINANCIAL ASSETS (INITIAL NET FINANCIAL BORROWING)
G. NET EFFECT OF TRANSLATION OF FOREIGN CURRENCY ON LIQUIDITY
H. FINAL NET FINANCIAL ASSETS (FINAL NET FINANCIAL BORROWING) (E+F+G)
RECONCILIATION OF FINAL NET FINANCIAL ASSETS
(FINAL NET FINANCIAL BORROWING):
CASH AND CASH EQUIVALENTS NET OF SHORT-TERM FINANCIAL PAYABLES AT
THE BEGINNING OF THE PERIOD, BROKEN DOWN AS FOLLOWS:
Bank overdrafts
Discontinued Operations
CASH AND CASH EQUIVALENTS NET OF SHORT-TERM FINANCIAL PAYABLES
AT THE END OF THE PERIOD, BROKEN DOWN AS FOLLOWS:
Bank overdrafts
Interest expense paid in 2007 totalled around 30,400 thousand euro
Taxes paid in 2007 totalled around 2,210 thousand euro
pag
32
31-12-2007
31-12-2006
5.829
38.060
(11.216)
4.486
0
0
(5.810)
(14.266)
(2.955)
14.128
(1.992)
31.165
2.923
(594)
0
0
(7.172)
(3.006)
84
21.408
(26.768)
(3.090)
(116.456)
(533)
0
(13.828)
(213.750)
(172.812)
29.622
30.130
(766)
0
(485)
2.479
0
0
4
(157.581)
0
0
0
(328.672)
1.550
(6.135)
27.623
(9.159)
(40.989)
0
0
(1.161)
2.671
0
(21.015)
0
(164.468)
253.700
0
89.232
(4.477)
294.810
68.585
(40.564)
0
240.742
0
559.096
0
247.247
6.453
0
253.700
253.700
0
0
253.700
7.501
(1.048)
0
6.453
89.232
0
0
89.232
253.700
0
0
253.700
SNAI S.p.A.
Net borrowing
Net Financial Position at 31.12.2007
(values in thousands of euro)
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.
N.
O.
P.
Q.
Cash
Other liquid assets
Securities held for sale
Liquid assets A+B+C
Current financial receivables:
- due from parent company
- due from subsidiaries
- due from companies subject to control
by the same parent company
- asset management account
- Banca Popolare Italiana warrant
Total current financial receivables
Current accounts payable due to banks
Current part of noncurrent borrowing
Other current financial payables:
- due from subsidiaries
- for concession acquisition (Vendor loan)
- due to others
Total other current financial payables
Current financial borrowing F+G+H
Net current financial borrowing I-E-D
Noncurrent financial assets
Noncurrent accounts payable due to banks
Bonds issued
Other noncurrent payables:
- for concession acquisition (Vendor loan)
- due to others
Total other noncurrent financial payables
Noncurrent financial borrowing L+M+N
Noncurrent net financial borrowing O - K
Net financial borrowing J+P
pag
Closing
31.12.2007
1
89.231
1
89.233
Opening
01.01.2007
4
253.696
1
253.701
(3)
(164.465)
0
(164.468)
13
2.388
0
4.996
13
(2.608)
2.539
15.238
6
20.184
0
18.820
1.344
0
17
6.357
0
12.131
1.195
15.238
(11)
13.827
0
6.689
0
491
7.554
5.793
13.838
32.658
(76.759)
0
225.908
0
42
488
41.710
818
43.058
55.189
(204.869)
0
242.328
0
(42)
3
(34.156)
4.975
(29.220)
(22.531)
128.110
0
(16.420)
0
20.043
67.429
87.472
313.380
313.380
236.621
26.875
44.172
71.047
313.375
313.375
108.506
(6.832)
23.257
16.425
5
5
128.115
33
Change
E. GRUPPO SNAI: OVERVIEW OF CONSOLIDATED PROFIT, LOSS, ASSETS, LIABILITIES AND
CASH FLOW
The Consolidated Balance Sheet, Income Statement and Cash Flow Statement tables compare the values at 31.12.2007 with
the values at 31.12.2006 in thousands of euro.
The consolidated financial statement tables of Gruppo SNAI have been prepared according to the IAS/IFRS issued by the International
Accounting Standards Board and adopted by the European Commission, showing a comparison with the income statement and
balance sheet at 31 December 2006 prepared with the same accounting standards.
Gruppo SNAI
Consolidated income statement closed at 31 December 2007
Revenue from sales and services
Other revenue and income
Increase of internally generated assets
Change in inventories of finished and semi-finished products
Personnel expenses
EBITDA
EBIT
Income and charges from equity investments
Financial income
Financial charges
Total financial charges and income
PRE-TAX EARNINGS
Income taxes
Profit (loss) for year
Attributable to:
Profit (loss) of Group on year
Profit (loss) of minority interests on year
Basic share earning (loss) in euro
Diluted share earning (loss) in euro
pag
34
2007
2006
492.546
5.752
1.326
119
(12.413)
(357.494)
(17.473)
(31.312)
81.051
(39.274)
41.777
353
4.683
(42.825)
(37.789)
3.988
4.531
8.519
217.568
5.245
520
(724)
(3.944)
(127.719)
(19.357)
(10.904)
60.685
(31.580)
29.105
(202)
1.789
(30.318)
(28.731)
374
(2.256)
(1.882)
8.519
0
(1.882)
0
0,07
0,07
(0,03)
(0,03)
Gruppo SNAI – Consolidated balance sheet at 31 December 2007
31/12/2007
31/12/2006
126.758
16.496
143.254
118.120
3.899
122.019
Goodwill
225.184
236.131
461.315
225.184
151.368
376.552
2.136
552
2.688
ASSETS
Noncurrent assets
Equity investments measured at equity
Prepaid taxes
14.681
2.193
624.131
1.357
542
1.899
145
11.078
2.059
513.752
Current assets
Inventories
Accounts receivable
Other assets
14.234
57.182
34.321
19.890
93.087
7
218.721
14.430
52.106
16.952
3.109
262.821
0
349.418
TOTAL ASSETS
842.852
863.170
Group portion of Shareholders Equity
Share capital
Reserves
Profit (loss) on year
Total Group Shareholders Equity
Minority interest
Total Equity
60.749
264.418
8.519
333.686
60.443
265.096
-1.882
323.657
333.686
323.657
Deferred taxes
5.433
313.488
43.966
7.437
13.874
384.198
9.758
313.518
51.946
2.841
19.569
397.632
Current liabilities
Accounts Payable
Other liabilities
32.300
60.465
13.383
18.820
32.203
124.968
31.904
55.267
42.579
12.131
54.710
141.881
842.852
863.170
pag
35
Gruppo SNAI – Consolidated cash flow statement
2.007
Group profit (loss) for year
8.519
Minority interest profit (loss) for year
0
39.274
Write-downs/reversals on noncurrent assets (including equity investments)
0
-11.583
4.596
(Capital gains) capital losses on sale of noncurrent assets (including equity investments)
-25
-262
Net change in noncurrent trade and other assets and liabilities and other changes
-5.836
Net change in current trade and other assets and liabilities and other changes
-15.731
- 4.325
14.627
-29.584
goodwill
concessions
determined payables due to AAMS
deferred taxes on company branch acquisition
-116.614
-533
-16.636
Payment collected for sale of equity investments in subsidiaries, net of transferred liquid assets
0
33
CASH FLOW GENERATED (ABSORBED) FROM INVESTMENT ACTIVITIES (B)
-163.334
27.646
-9.159
- 41.024
Other shareholders’ equity changes
-1.160
2.670
-21.027
D. CASH FLOW FROM DISPOSED ASSETS/AVAILABLE-FOR-SALE ASSETS (D)
E. TOTAL CASH FLOW (A+B+C+D)
-169.734
262.821
H. FINAL NET FINANCIAL ASSETS (FINAL NET FINANCIAL BORROWING) (E+F+G)
93.087
RECONCILIATION OF FINAL NET FINANCIAL ASSETS (FINAL NET FINANCIAL BORROWING):
CASH AND CASH EQUIVALENTS NET OF SHORT-TERM FINANCIAL
PAYABLES AT THE BEGINNING OF THE
PERIOD, BROKEN DOWN AS FOLLOWS:
262.821
Bank overdrafts facilities
0
Discontinued operations
262.821
CASH AND CASH EQUIVALENTS NET OF SHORT-TERM FINANCIAL PAYABLES
AT THE END OF THE
93.087
Bank overdrafts
Discontinued operations
93.087
Interest expense paid in 2007 totalled around 30,858 thousand euro.
Taxes paid in 2007 totalled around 2,768 thousand euro.
pag
36
2.006
-1.882
0
31.580
0
3.269
-810
125
202
-5.205
-3.961
0
23.318
-4.408
-213.454
-172.727
68.765
29.622
30.130
-680
-9
-511
170
0
11
-263.091
-641
294.810
- 40.564
240.715
494.320
254.547
8.274
262.821
9.322
-1.048
8.274
262.821
0
262.821
Gruppo SNAI Net Financial Position
thousands of euro
A. Cash
B. Other liquid assets
bank
postal c/a
C. Securities held for sale
D. Liquid assets (A) + (B) + (C)
E. Current financial receivables
- financial c/a due from parent company
- financial c/a due from subsidiaries
- financial c/a to companies subject to control by the same parent company
- Asset management account
F. Current accounts payable due to banks
G. Current part of noncurrent borrowing
H. Other current financial payables:
financial c/a to companies subject to control by the same parent company
- for horse racing and sports concession acquisition
- due to other lenders
I. Current financial borrowing (F) + (G) + (H)
J. Net current financial borrowing (I) - (E) -(D)
K. Noncurrent financial assets: BTP 5% due 01.05.08
L. Noncurrent accounts payable due to banks
M. Bonds issued
N. Other noncurrent payables:
O. Noncurrent financial borrowing (L) +(M) + (N)
P. Noncurrent net financial borrowing (O) - (K)
Q. Net financial borrowing (J) + (P)
pag
37
31.12.07
31.12.06
83
93.004
92.978
26
1
93.088
19.889
74
2.032
2.539
15.238
6
18.820
13.383
107
262.714
262.694
20
1
262.822
3.108
30
1.719
1.343
7.590
5.793
32.203
-80.774
225.908
41.746
833
54.710
-211.220
145
242.328
87.580
67.430
20.150
313.488
313.488
232.714
71.190
44.172
27.018
313.518
313.373
102.153
16
12.131
42.579
F. RECONCILIATION STATEMENT BETWEEN PROFIT/LOSS FOR THE YEAR CLOSED AT 31.12.2007
AND GROUP SHAREHOLDERS EQUITY WITH THE SAME VALUES OF THE PARENT
31.12.2007
31.12.2006
SNAI S.p.A. financial statements
5.829
-1.992
329.810
322.471
Shareholders’ equity surplus includes the profit for the year
compared to the carrying values of the consolidated companies.
- dividends distributed during the year
2.600
-174
649
-142
3.648
1.222
0
169
92
3
201
-60
-397
74
74
thousands of euro
Measurement of equity investments in associates
with the equity method of which:
- profit (loss) for year
- dividends distributed during the year
Reversal of write-downs/reversals on equity investments
and write-down of inter-group receivables
31.12.2007
31.12.2006
Other adjustments
Total Group portion
3
8.519
-3
-1.882
-47
333.686
-50
323.657
Minority interest portion
Total consolidated financial statements
8.519
-1.882
333.686
323.657
G. OPERATIONS OF SNAI S.P.A. AND GROUP COMPANIES
A summary of the activities and main facts which characterised the operations of the individual Group companies in 2007 is
provided below.
1. SNAI S.p.A.
.
After having grouped the main activities in itself in terms of the supply of goods and services to bet acceptance points, as of 16
March 2006 the company became the owner of 232 horse racing concessions and 218 sports concessions, later added to by
the outcome of the so-called Bersani call for tenders with the ownership of 5,092 new licensees of which 3,886 horse racing and
1,206 sports, in addition to 2 concessions for remote horse racing and sports gaming.
As of June 2004 SNAI S.p.A. also became the owner of the concession to manage the network of amusement machines.
At 31.12.2007 the company carried out the following activities:
• direct management of 450 concession acquired on 16 march 2006 using services supplied by manager previously sellers
of concession company branches and the first part of the points of sale made operative for activation of the licenses
resulting from awarding of the Bersani call for tenders:
o n.86
Sports Shops;
o n.454
Sports Points;
o n.28
Horse Racing Shops;
o n.623
Horse Racing Points;
• it supplies an on-line computerised system able to connect the around 10,000 terminals active at PAS and newly opened
“Bersani” points of sale via cable or satellite to the national collection network, allowing them to transfer and process
data related to the individual bets. The system is used to record and account for all the data related to each single bet,
transmit them from the Punto SNAIL to the processors of Sogei S.p.A. for the Ministry of the Economy and Finance and,
when the authorisation is received from this Ministry and the bet registration number, to issue a final receipt for possible
payment of winnings (“bet ticket”);
• provide Punti SNAI, both directly managed and those of customer, with a technical and IT support related to verifying
the gaming trends, as well as management of the fixed odd betting systems (e.g. technical-sports information, the formulation
of opening odds and their updating in real time, etc.);
pag
38
• disseminate the opening odds via satellite and related updates during gaming collection;
• supply the software and computerised system for collection of telephone bets via sms and via Internet, as well as the software
and computerised system for a possible interconnection for connection to Bingo halls, both to each other and with Azienda
Autonoma Monopoli di Stato (AAMS), for transferring information related to the game;
• supply hardware and software systems to licensees needed to manage the bets, as well as all the related technical assistance
services, including on machines owned by the licensees;
• deliver organisational and commercial consultation connected to the business of bet accepting, game of Bingo, “concorsi
a pronostico” (Ippica Nazionale, “Big” bets, Totocalcio, Totogol, Il 9, etc.) and amusement machines;
• design, sell and install machines, set-ups and services for the renovation of PAS, Bersani points of sale (shops and corners)
and creation of Bingo halls;
• promote the commercial brands owned by the Group. It also takes care of encouraging market development and enhancement
of the SNAI image with the public. This is done through advertising campaigns and the publication of odds and information
functional to bets in sports dailies and media aimed at the general public, as well a through public relations and press
office activities, in addition to creating and managing events.
SNAI S.p.A. is currently involved in the complete opening of the 5092 points of sale, which it was awarded as the outcome of
the aforesaid call for tenders, in part using the collaboration of current BAP (Bet Acceptance Points) distributed throughout Italy for
this activity.
For an analysis of the profit and loss, asset and liability and financial values for 2007 see the related paragraph.
2. OPERATING SUBSIDIARIES
2.1.
FESTA S.r.l.
The company handles management of the collection of computerised bets (telephone, Internet, sms, etc. via SNAI GOLD Giocasport
card – SNAIcard) on behalf of the licensee Punti SNAI and SNAI S.p.A. Upon assignment from SNAI S.p.A. it also performs
help desk and call center activities for the Punti SNAI, new points of sale awarded following the Bersani call for tenders and legal
gaming, using amusement machines.
Festa S.r.l continues to develop technologies for the licensees in order to lead to full activation of an offer of computerised and via
phone acceptance services and bet management. In particular, it offers telephone assistance and IT and technical support services
related to directly and indirectly managed Punti SNAI activities.
Current regulations allow the supply of services for the computerised collection of horse racing and sport bets and for “concorsi a
pronostico”. For the past few years the company has also offer functional services for collecting bets via sms.
Revenue for 2007 reached ¤7,052 thousand (¤6,141 in 2006). Revenue was basically from the 2% fee on computerised bets
and Internet bets paid to Bap for ¤448 thousand and other open contracts for ¤1,581 thousand and other Group companies for
4,120 thousand.
The financial statements closed with a pre-tax profit of ¤1,187 thousand (¤996 thousand profit in 2006). Net profit reached 1,488
thousand thanks to the allocation of deferred tax assets on accruals and on previous losses which cancelled the tax charge for the
year. This profit resulted after having made depreciation and amortisation for ¤252 thousand (¤209 thousand the previous year)
and accruals for ¤243 thousand (¤105 thousand the previous year).
The cash flow generated by operations was ¤1,983 thousand with a total operating revenue of ¤7,052.
The continual growth trend in computerised bets and the initiatives being implemented aimed at increasingly developing the sector
of Internet, telephone and self-service terminal betting, makes it possible to predict a positive result for the current year, as forecast
in the 2008 budget.
2.2.
Società Trenno S.r.l.
The company established following a spin-off of the specific company branch started operations 20 September 2006: it handles
the management of the race tracks of Milan (trot and gallop) and Montecatini (gallop).
Within the framework of the U.N.I.R.E. (National Association for the Betterment of Horse Breeds), public agency under the Ministry
for agricultural and forestry policies, the company organises the management of galloping training center of Milan San Siro and
the collection, at the race track of bets on horse races.
For the national programme coordinated by U.N.I.R.E., Trenno organises the races according to a set calendar, receiving an annual
fee from the agency established by a multi-year convention-contract.
pag
39
This payment is calculated on the volume of bets collected outside and inside the race tracks, on the quality of the television broadcast
of the races being performed in the managed race tracks and on the remuneration of other connected services for greater use of
the horse race track facilities.
In addition to the fees for the organisation of horse races, Trenno also receives proceeds from U.N.I.R.E., including:
•
payments for use of the facilities from horse racing operators;
•
other revenue for advertising and sponsorship as well as for transfer of spaces inside the tracks and real estate complexes
and providing areas and structures for events;
•
proceeds of a minor amount connected to the rental of various commercial activities within the real estate complexes (e.g.
restaurants, cafes, car parks, etc.).
During the first months of 2006, the final phase of the discussion with U.N.I.R.E. was reached for a new convention between
U.N.I.R.E. and the Racing Companies.
The contacts developed with U.N.I.R.E., as well as the possible projections of the new convention hypothesis, made it possible to
recognise certain revenues, for 2007, already paid out by the Agency as an advance, already promptly paid month per month.
These include the payments for services delivered for the training center, television services and for the so-called customisation of
the race tracks, as well as commissions of TRIS and Ippica Nazionale bets, as quantified in a specific protocol signed on 12.12.2007
between U.N.I.R.E. and the involved horse racing companies, including TRENNO S.r.l.
In light of the fact that the racing company in the previous year had worked from 20 September to 31 December 2006 it is
important to note that the revenue of 2007 total ¤25.679 thousand (¤7,002 thousand in 2206) and closes the period with a
profit of 210 thousand (against a loss of 156 thousand in 2006) after depreciation and amortisation of ¤954 thousand (¤202
thousand in 2006) in addition to accruals for 153 thousand (¤377 thousand in 2006).
The net profit was also influenced by charges for horse race company rentals and leases for ¤5,278 thousand sustained for the
use of the real estate complexes which the company transferred during 2006, in addition to zeroing out of the grants for the Milan
gallop training centre which in previous years U.N.I.R.E. had paid in a significant amount.
The cash flow generated by operations shows a total absorption of 5,096 thousand resulting mainly from investments made in
property, plant and equipment for technology and television filming equipment, for a significant increase in receivables due from
U.N.I.R.E. for payments and grants to collect.
At the same conditions as 2007, the operations conducted by the subsidiary TRENNO does not appear to have profits to close
the year in a positive light.
2.3.
Immobiliare Valcarenga S.r.l.
Again in 2007 business continued along the traditional lines to support the horse racing facilities in use by Trenno S.r.l. through
instrumental leasing of its properties.
The financial statements at 31 December 2007 shows a profit of 38 thousand (44 thousand the previous year) after depreciation,
amortisation and accruals for 11 thousand (11 thousand the previous year).
The cash flow generated by operations was 49 thousand against a turnover of 98 thousand (114 thousand in 2006), 59 thousand
of this is inter-group (79 thousand in 2006).
The result for the period and the equity – financial structure make it possible to forecast a positive result for the current year in line
with operations in 2007.
2.4.
Mac Horse S.r.l.
The company was acquired on 24 February 2004 by SNAI S.p.A. and works in the publishing segment, mainly to create bills
for horse racing and sports betting and for managing the archives connected with the performance of race horses. This activity
performed exclusively for Gruppo SNAI, is considered strategic and functional for the Group’s know-how.
With revenue of ¤601 thousand at 31 December 2007 (it was ¤624 thousand in 2006) mainly resulting from the parent company,
the financial statements closed with a profit of ¤137 thousand (against ¤151 thousand in 2006), after depreciation, amortisation
and write-downs for ¤8 thousand (¤8 thousand in 2006).
The cash flow generated by operations was 140 thousand with a total operating revenue of 601.
The forecast result for 2008 is currently for a profit in line with the previous year.
pag
40
3. DIRECT ASSOCIATES
3.1
“Società Gestione Capannelle S.p.A.”
The equity investment of 26.67% is held directly by SNAI S.p.A. The financial statements at 31 December 2006 closed with a
loss of ¤1,202 thousand (against ¤598 thousand in 2005).
This result is due to: operating revenue of ¤11,306 thousand (against 10,870 in 2005), operating costs for ¤12,442 thousand
(against ¤11,276 thousand), net financial charges ¤61 thousand (against ¤82 thousand in 2005) and net extraordinary income
for ¤75 thousand (against ¤41 thousand in 2005).
The 2006 financial statements also show depreciation, amortisation/write-downs for ¤844 thousand (against ¤613 thousand in
2005). Operating costs include fees for ¤2,174 thousand (against ¤2,135 thousand in 2005) due to the Municipality of Rome
for use of the territory (track and training centre), whose concession was renewed until 2010. During the 2007 an increase in
share capital was voted on up to ¤1,956 thousand, after settlement of previous losses to 31 March 2007 which totalled ¤1,936
thousand euro.
The settlement of losses and reconstruction in Share Capital was entirely performed by 31 December 2007 without substantial
changes to the corporate shareholding structure.
3.2
“Alfea S.p.A. – Società Pisana per le Corse dei Cavalli”
The equity investment is possessed at 30.70% directly by SNAI S.p.A.
The financial statements at 31 December 2007 show a profit of ¤531 thousand (¤578 thousand in 2006) after depreciation,
amortisation and write-downs for ¤256 thousand (¤208 thousand in 2006).
This result is due to: operating revenue of ¤5,164 thousand (against ¤5,463 thousand in 2006), operating costs for ¤4,249
thousand (against ¤4,397 thousand in 2006), net financial income for ¤121 thousand (against ¤33 thousand in 2006) and net
extraordinary charges for ¤43 thousand (against ¤10 thousand in 2006).
Operating costs include the concession fee to the Region of Tuscany (which will expire on 31.12.2040 for use of the horse racing
territory totalling ¤127 thousand annually.
3.3
SOLAR S.A.
The Luxembourg direct associate was established in March 2006 with a share capital of ¤31,000 of which SNAI S.p.A. holds
30% for a nominal value of ¤9,300.
The Company closed its first financial year at 31.12.2006 with a profit of ¤41 thousand after depreciation and amortisation for
¤136 thousand. It is estimated that for 2007 the company will achieve a profit in line with that from the previous year.
4.
OTHER EQUITY INVESTMENTS
4.1.
Connext S.r.l.
The company is held for a total of 25% of share capital for ¤81,600 of which 10% has been reclassified in the item “Availablefor-sale financial assets”. Since 2006 SNAI S.p.A. has assigned Connext Srl to coordinate and manage the work for the production
and assembly of terminals for the betting points of sale.
During the current year Connext has also handled technological technical assistance for SNAI network points of sale. The draft
financial statements at 31 December 2007 closed with a profit of ¤27 thousand (against a profit of ¤9 thousand at 31 December
2006) after depreciation and amortisation for ¤31 thousand (¤29 at 31 December 2006).
Operating revenue totalled ¤1,065 thousand (¤1,247 thousand at 31 December 2006) and operating costs totalled ¤972
thousand (¤1,180 thousand at 31 December 2006) leaving an EBIT of ¤94 thousand (¤67 thousand at 31 December 2006).
The forecasts for the closing of 2008 are for a result in line with that of the previous year.
4.2
TIVU+ S.p.A. in liquidation
TIVU+ S.p.A. received an approval from the pertinent Court for composition before bankruptcy already approved by its creditors
in December 2005. TIVU+ S.p.A. (share capital ¤520,000 held by SNAI S.p.A. for ¤101,400) was put into voluntary liquidation
by the Extraordinary Shareholders’ Meeting on 7 July 2004.
The carrying amount of the investment in TIVU+ S.p.A. in liquidation was already entirely written down and all receivables due to
SNAI S.p.A. from it have been adjusted to the estimated realisation value.
pag
41
H. TRANSACTIONS WITH SUBSIDIARIES, ASSOCIATES, PARENT COMPANIES AND COMPANIES
SUBJECT TO PARENT COMPANY CONTROL
As is customary, the transactions between the parent company SNAI S.p.A. and its subsidiaries and associates consists of managerial
and financial assistance, performance of services, as well as leasing, including the related services of real estate instrumental to
the performed activity.
The specific services and performance supplied by the subsidiaries are charged by the parent company based on operating costs
and the supply of services and performances, marked up based on the entity of the necessary structure and the related overhead.
The charged cost is deemed appropriate and not greater than that which the individual Group companies would have incurred
to obtain the same services on the market in terms of quality, quantity and timeframes.
The other administrative and technical services which are produced, delivered and used within the group companies, are charged
to the subsidiaries and associates based on their effective use, taking into account the cost to purchase or produce the service or
performance.
Transactions of a financial nature exist with the parent company SNAI Servizi S.r.l. regulated at the best market conditions and
interest rates substantially in line with Euribor at 3 months plus 5 percentage points, as well as performance of legal services.
Management of the administration offices at the Porcari headquarters was directly undertaken by SNAI S.p.A. starting in the month
of August 2004: the Group companies housed in the offices are charged back for the rental and expenses based on the area
they occupy and the cost of used services.
Specific services acquired from third parties in the total interest of the group and especially related to the financing, legal, tax and
technical areas are charged back proportionally to the specific interest of each company.
See the Explanatory Notes to the financial statements for details on all the transactions which SNAI S.p.A. had during 2007 with
subsidiaries, associates and the parent company or companies which are subject to the control of the parent company.
In paragraphs 29 and 30 in the Explanatory Notes to the statutory financial statements, transactions are described in detail which
are entered in the balance sheet, income statement and memorandum accounts of SNAI S.p.A. with other group companies and
related parties.
I. FINANCIAL STATEMENT AUDITING
The shareholders’ meeting of 15 May 2007 conferred the assignment for auditing, in accordance with article 159 of Legislative
Decree no. 58 of 24.2.1998 as modified by article 3 of Legislative Decree no. 303 of 29.12.2006, for each of the 9 financial
years closing from 31.12.2007 to 31.12.2015 to auditing firm Reconta Ernst &Young.
In compliance with Consob regulation no. 11971 of 14.5.1999, citing article 2428 third paragraph of the Italian Civil Code,
they were also conferred auditing limited to six month reports.
The total payment was established at ¤204 thousand, of which ¤170 thousand for the parent company SNAI S.p.A., and includes
the portion of ¤48 thousand for the limited audit of SNAI S.p.A. and Gruppo SNAI and was determined taking into account the
hourly rate related to the personnel’s qualifications, the estimated time and in general with the criteria established by Consob.
The decided payment, which does not include expense reimbursement, direct expenses, secretarial services, VAT and adjustments
based on Istat (Italian cost of living index) may be changed for greater commitment and increases in work which become necessary
based on any changes in the size of the Group or its activities.
The awarding of new licences after the outcome of the so-called Bersani call for tenders and the increased quantity both of activity
connected with management of the concessions acquired as of 16 March 2006 and the activity of amusement machines turned
this possibility into a reality.
Therefore, in relation to this changed situation and in accordance with the general criteria for determining the payment for the
assignment of auditing as per article 145 bis of Issuers’ Regulations, Reconta Ernst & Young has re-estimated the times contained
in its original proposal of 19 March 2007 for each of the activities contained in it and for each of the financial years from 2007
to 2015.
Due to the increase in work and greater commitment necessary, with its supplementary letter of 26 March 2008 Reconta Ernst &
Young requested an adjustment in the payment as shown in the table.
pag
42
Auditing Company assignment
Payments from 2007
assignment
Greater post-payments
Audit of SNAI S.p.A. financial statements
Periodic audits art. 155, par. 1, letter A) Financial Act of SNAI S.p.A.
Limited audit of six month report of SNAI S.p.A. and Gruppo SNAI
Audit of consolidated financial statements of Gruppo SNAI
Auditing activity for minority interests
Auditing activity for tax returns
70,000
20,000
48,000
10,000
20,000
2,000
103,000
35,000
78,000
10,000
42,000
2,000
Total
170,000
270,000
Payments approved by the subsidiaries TRENNO S.r.l. and Festa S.r.l. totalling 24,000 euro for specific assignments need to be
added to the payments indicated in the table. The payments above do not include direct expenses, secretarial services, Istat and
Vat.
J.
HUMAN RESOURCES AND INDUSTRIAL RELATIONS
The level of employment at Gruppo SNAI reached 465 units at 31.12.2007, an increase of 39 units (essentially in service activities)
compared to the end of 2006.
The increase is fundamentally due to an increase in staff in operating departments, to support the expansion in activities resulting
from direct management of the acquired concessions, including following the “Bersani” call for tenders of October, and development
of activities involving amusement machines.
Total staff is broken down as follows:
Gruppo SNAI
Executives
Clerks and Middle Management
Workers
Total Employees
*
**
31.12.2007
17
336
112
465*
31.12.2006
16
300
110
426**
of which 47 part-time and 9 on maternity leave
The improved automation of some operations, obtained thanks to the use of outside consultants and freelancers, made it possible
to contain the growth in staff to a lower amount even with the significant increase in operating revenue and costs.
The Parent Company staff increased by 22 employees, rising from the initial 201 employees at the end of 2006 to 223 employees
at 31.12.2007.
SNAI S.p.A.
Executives
Workers
*
**
31.12.2007
15
203**
5
223
31.12.2006
15
182*
4
201
The parent company SNAI S.p.A. adopted the National Labour Contract “Workers employed in the private metalworking and plant
installation industry”, in keeping with what occurs at our main competitors.
The operating company Festa S.r.l. applies the commerce National Labour Contract.
The companies which operate in the horse racing segment apply the National Labour Contract for horse racing companies.
pag
43
K. HEALTH AND SAFETY IN THE WORKPLACE
During 2007 an awareness programme for employees and in general all workers who work inside the plants continued on problems
regarding occupational safety.
The activity was implemented by distributing memos, specific training courses and specific information as well as meetings at different
levels are required by specific regulations.
In compliance with the provisions of Legislative Decree no. 626 of 1994, additional investments were made to improve the
adequacy of plants and equipment to the requirements of the specific regulation.
In terms of safety in the workplace, for the past few years a mobile first aid unit has been kept inside the race tracks for accidents
either during races or training.
The programme of preventive medicine for worksites was continued during 2007 with the support of assigned doctors and the
company’s Milan infirmary. Interventions are also being implemented suggested by the study required and commissioned in
accordance with Legislative Decree no. 626 of 19.09.1994 on safety of managed plants and prevention of occupational accidents,
in application of what is required by specific European Union and national laws.
L. RELATIONS WITH RELATED PARTIES AND CORPORATE BODIES
With reference to the articles 124 bis of the Financial Act, 89 bis of CONSOB Issuers CONSOB issuers and Article I.A. 2.6 of
the instructions to the Stock Exchange Regulations the Board of Directors prepare the Annual Report on the Corporate Governance
System which, among other things, provides information on any transactions with related parties, containing the procedures and
effects of any performed transactions.
The Group Companies have maintained their conduct in line with the cited recommendations.
Currently, within the framework of Gruppo SNAI Companies, relations with related parties are represented by contracts of a
commercial or financial nature, and for services of an administrative, financial and tax consultation, tax and organisational nature
with subsidiaries.
Other relations are represented by contracts with the parent company SNAI Servizi S.r.l. for legal assistance services and for
regulation of the financial current account.
The transfer prices are related to active sales prices in the betting collection chain; purchase costs for services governed by commercial
contracts use market prices and conditions as a reference for contracts of a financial nature and operating costs for services and
performance for the other buying and selling of services.
The contracts are formalised and invoiced on a multi-year frequency, including performances for services supplied by some subsidiaries
for other Group companies, as well as those supplied by SNAI S.p.A. to the other Group companies, performance of services
between operating companies, company rent and lease payments with which the SNAI Parent Company assigns management of
the Training Centre and real estate complexes of the race tracks to Trenno Srl.
The Group performs services for the licensees of horse racing agencies and sports agencies, as explained above. Following the
acquisition of 450 company branches, concessions, the former sales licensees all signed a management contract with SNAI S.p.A.
used to supply services for the collection of bets and payment of winnings to bettors, receiving a pre-determined payment.
Many licensees hold stakes in the share capital of the parent company SNAI Servizi S.r.l. Transactions, in standardised contracts,
are governed at market conditions completely identical to those of third party licensees.
The Board of Directors in office has not established an Executive Committee after the one which left office on 23 May 2002 at
the end of its term.
As required by Law and the company Articles of Association, the Board of Directors has attributed powers of substantially ordinary
administration to the Chairman and in his absence to the Vice Chairman. For specific needs, on a time to time basis the Board of
Directors attributes extraordinary administration powers to the Chairman and Vice Chairman with possible option of subdelegate.
With its resolution of 17.05.2005 the Board of Directors re-established the Audit Committee, with non-operative Directors Andrea
Siano (Chairman), Alberto Lucchi and Paolo Rossi; the function of Audit Committee can be performed by external individuals.
The Audit Committee met four times during 2007.
pag
44
M. SHAREHOLDING OF DIRECTORS, STATUTORY AUDITORS AND MANAGING DIRECTOR
As required by article 79 and statement 3 of the Consob resolution no. 11971 of 14 May 1999 the shareholdings in the issuer
company and its subsidiaries in 2007 possessed by directors, statutory auditors and managing director as well as spouses who
are not legally separated and minor age children are shown below.
Surname
Name
Holding
Equity
investment
Shares
Held at
31/12/2006
Shares
Acquired in
2007
Shares
Sold in
2007
Shares
Held at the
of 2007
Carlotti
Alessandro
direct
spouse
SNAI S.p.A.
SNAI S.p.A.
1.530
7.162
0
0
0
0
1.530
7.162
Cioffi
Francesco
Equity
investment
SNAI S.p.A.
19.616
0
0
19.616
SNAI S.p.A.
SNAI S.p.A.
Trenno S.p.A.
33.920
1.951
244
8.000
0
331
0
0
0
41.920
1.951
575
Garza
Luciano
direct
spouse
spouse
Ginestra
Francesco
Equity
investment
SNAI S.p.A.
34.314
0
0
34.314
Losco
Pasquale
direct
SNAI S.p.A.
21.200
0
0
21.200
Lucchi
Alberto
direct
SNAI S.p.A.
0
10.000
0
10.000
Equity
investment
SNAI S.p.A.
14.907
0
0
14.907
Mecacci
Alessandro
direct
SNAI S.p.A.
14.840
0
0
14.840
Ughi
Maurizio
Equity
investment
SNAI S.p.A.
5.948
0
0
5.948
The directors: Claudio Corradini, Paolo Rossi and Andrea Siano the Statutory auditors: Francesco Lerro and Lorenzo Ferrigno
declared that they did not hold at the end of 2007, nor did they hold during 2007, shares of the issuer SNAI S.p.A., nor other
companies controlled by it.
N. ADOPTION OF IFRS – International financial reporting standards
The financial statements of SNAI S.p.A. and the consolidated financial statements at 31.12.07 were prepared based on the IFRS
in effect as of that date, issued by the International Accounting Standards Board (IASB) and adopted by the European Commission.
The accounting standards used to prepare the annual financial statements of the parent company and the consolidated financial
statements of the Group are in compliance with the accounting standards adopted in the corresponding financial statements closed
at 31.12.2006, with the exception of what is indicated and explained in the notes related the specific items.
The IFRS are considered also to be revised international accounting standards (IFRS and IAS) and all the interpretations of the
International Financial Reporting Interpretation Committee (IFRIC and SIC), adopted by the European Union.
It is important to note that during 2004 the company had started a programme to adopt the international accounting standards
issued by IASB to adapt its statutory and consolidated financial statements, to the regulation issued by the European Union in order
to unify the various accounting languages used by the various countries to improve the readability of the financial statements of
companies traded on various worldwide Stock Exchanges.
The transition process from the national accounting standards to the international IAS/IFRS was completed with the annual financial
statements of SNAI S.p.A. closed at 31.12.2006, while already at 31.12.2005 the Group’s consolidated financial statements
and the explanatory notes were prepared according to the international accounting standards.
pag
45
O. BUSINESS OUTLOOK AND SUBSEQUENT EVENTS
The action described herein, which were undertaken by the directors in order to implement the recently updated 2008-12 industrial
plan, were aimed at direct management of the new activities to undertake horse racing an sports bets an started on 16 march
2006. Further, these action were integrated with the results of the opening of new points of sale, awarded after the outcome of
the call for tenders, and have made at possible to acquire consistent financial resources.
The new activities in the industrial plan have been added to the traditional service provider activities for the concessions which
choose not to take part in the SNAI S.p.A. offer and expansion of intertainment machine activity
This actions make it seem reasonable that the core business, significantly expanding, will be able to keep a position of economic
equilibrium and continue to generate adequate cash flows to face the obligations of SNAI S.p.A. and the Group and consolidate
the recently acquired businesses at the same time.
In terms of the service of the summons before the Audit Office on 16 January 2008 and the ruling no. 2728/2008 of the second
session of the Lazio Regional Court published on 1 April 2008, see the discussion in the paragraph entitled ”Reports from the Italian
Audit Office and administrative disputes for presumed breach in management of computerised network for interconnection of
amusement machines”.
1. Business Plan 2008-2012
In October 2006 the company had finalised its participation in the call for tenders called by AAMS in accordance with Legislative
Decree no. 223 of 4 July 2006 converted with modifications and integrations in law no. 248 of 4 August 2006 for assignment
as concession to run the public gaming of horse races and those of events other than horse races, to be exercised ai the points of
sale having sale of these products as ancillary activity.
In December 2006, the AAMS made the classification official for the results of the call for tenders called by the Ministry of Economy
an Finance and in application of the Bersani decree. In particular, SNAI S.p.A. was awarded 1206 sports licences 99 shops
an 964 corners and 3.886 in addition to the concessions for remote horse sports gaming.
The new concessions will expire on 30.6.2016. They will join the 450 concessions already owned by SNAI S.p.A.,that is 218
sports and 232 horse racing concessions.
SNAI plans to make the new points of sale operative by the end of 2008. The bet acceptance network tuill be composed of a
total of more then 6,000 concessions, thus achieving the most extensive network in Italy with the presence of a point of sale every
10,000 inhabitants.
After the start-up of the horse racing gaming shops and points (corners) for each province as well as sports gaming sports shops
and points (corners) for each municipality and the gradual monitoring of movements of bets collected by the new and previous
bet acceptance points, the need to update the Industrial Plan has become a reality.
The estimated potencial of the collection of the betting volume and rights which have been used after adeguate alignments for
the preparation of the new updated industrial plan are considered prudent
The new plan encompasses the 2008/2012 period and takes into consideration the structure and situation currently present in
the Country, both in terms of customer licensees and the 450 concessions owned by SNAI S.p.A. acquired star since on 16 March
2006. The plan integrateds the forecasts of revenue, yield and costs of the new points of sale in relation to the opening and
programmed prompt identification of premises, stipulating contracts for such premises and start-up and opening to the public for
the sale of bet for the remaining 50% of the licences still in the process of being formalised by contract.
The organisational structure for elaborating the multi-year plan has remained the same as the one prepared in September 2006
adding in a completely independent manner a reasonable hypothesis for increasing economic, equity and financial values resulting
from the opening of new points of sale (new rights), and the direct management of potential owner customer of the new concessions.
To this the forecasts for a gradual addition of amusement machines in the new Bersani points of sale needs to be added and the
start-up of new activities of the so-called “skill games” already authorised for the remote concessions of the Bersani licences, for
which a technical implementation regulation is expected.
pag
46
2. Notes related to the data security policy (Legislative Decree no. 196/03)
The technical regulations annexed to the privacy law (Legislative Decree no. 196/03) under point 26 requires that in the directors’
report on operations accompanying the financial statements the data controller reports on the adoption or
updating of the data security policy.
The data security policy is required as the obligatory minimum security measure for the treatment, using IT information systems, of
data considered “sensitive” or “judicial” based on this legislation.
In the company, data including sensitive, is processed by the IT system for the database used by
the various company functions to carry out their operations.
Therefore, in compliance with the obligation contained in point 19 of the aforesaid technical regulations, our Company has prepared
all the initiatives and all the documents, for example the Corporate IT Regulations, necessary to comply with the legal provisions
and current laws on the matter.
P. OTHER INFORMATION IN ACCORDANCE WITH ART. 2428 OF THE ITALIAN CIVIL CODE
AND ART. 40 OF ITALIAN LEGISLATIVE DECREE 127
The company does not hold, directly or indirectly, by means of Gruppo SNAI companies, trust companies or any intermediaries,
shares in the parent company.
No purchase or sale transaction of these shares occurred during 2007 or in the first months of 2008.
Neither SNAI S.p.A. nor other Gruppo SNAI companies have ever granted a loan or provided guarantees directly or through
intermediaries for the purchase or negotiation of shares of SNAI S.p.A. or its parent company.
SNAI S.p.A. and the other Group companies are not subject to particular exchange rate risks.
There is a greater sensitivity towards interest rate since its loan contracts and liquid asset commitment are tied to the euribor at three
months.
To date derivative financing contracts (off balance sheet transactions) have not be undertaken by SNAI S.p.A. or other Group
companies to hedge against the herein mentioned risks.
Gruppo SNAI manages its commercial risk towards its customers internally.
Q. BOARD OF DIRECTOR’S PROPOSALS TO THE SHAREHOLDERS’ MEETING
1. Approval of the Directors’ Report on operations, financial statements and proposal for allocation of profit.
Dear Shareholders:
We are confident in your approval of the form and methods adopted in the report of the financial statements at 31/12/07, in
its entirety and the individual parts and we are asking you to vote on:
• approval of the report, financial statements and explanatory notes
We propose that you approve, together with the report on operations, the financial statements at 31/12/07 which
close with a profit of ¤5,828,623.70;
• Allocation of profit for year
In order to make the financial structure more consolidated in the current development phase of the betting sales
network for new games, the Board of Directors proposes allocating profit for the year as shown on the Balance
Sheet and Income Statement as follows:
Profit for year
to allocate to:
5% Legal reserve:
Retained earnings (losses b/f)
Euro
5.828.623,70
291.431,185
5.537.192,515
Allocation to the “Retained earnings (losses brought forward)” which currently has a negative balance of ¤632,571 at 31.12.2007,
would have a total balance of ¤4,904,621.515.
pag
47
2. Change in payment for the assignment of auditing as per art. 159 of increare Italian Legislative Decree no. 58 of 24 February
1998: related resolutions
The auditing firm Reconta Ernst & Young has requested a supplement on additional ¤100 thousand to its payments, compared to
that already approved amount by the shareholders’ meeting of 17.05.2007 which totalled 204 thousand.
The increase in the Company’s and Group’s activities thanks to the awarding of new licences based on the outcome of the socalled Bersani call for tenders, the connected opening of these new points of sale, increased quantity both of management activity
for the concessions acquired 16 March 2006 and that for amusement machines, have required a greater commitment from the
Auditing Company compared to what was originally estimated for performing its work.
As described in detail in the specific paragraph “I – Financial statement auditing” in this report on operations, it is now necessary
to adjust the payments to the additional work performed for the year 2007 and forecast for coming years until 2015 in compliance
with the provisions of article 159 of Italian Legislative Decree no. 58 of 24 Februar y 1998 et seqq.
The Reconta Ernst & Young Company is also providing assistance to create the project to adapt to the Law on Savings no. 262/05
which the company is in the process of implementing, in part following the appointment of a manager assigned to preparing
accounting documents. The commitment of resources which Reconta Ernst & Young plans to use to carry out this assignment has
been quantified in a payment totalling ¤120,000.
We are proposing that you approve the supplement in payments up to ¤220 thousand, in addition to expenses and VAT.
3. Appointment of the Board of Directors
With this shareholders’ meeting the Board of Directors’ term in office draws to an end.
Therefore, we are asking you to appoint a new board of directors as established by article 14 of the Articles of Association, where
the shareholders’ meeting is also asked to determine the number of board members, term of office and related remuneration.
Thus we invite you to appoint a new board of directors as established by article 14 of the Articles of Association.
4. Appointment of the Board of Statutory Auditors
With this shareholders’ meeting the Board of Statutory Auditors’ three year term draws to an end.
We would like to remind you that the Law on Savings 262/2005 establishes that the Statutory Auditors must possess the requirements
of honorability, professionalism and independence, therefore the board of directors invites the shareholders’ assembly to appoint
a new Board of Statutory Auditors as required by article 23 of the Articles of Association and to determine the annual remuneration
due to the standing auditors and Chairman of the Board of Statutory Auditors.
The Chairman
Maurizio Ughi
Porcari (Lu), 28 March 2008 / 14 April 2008
*****
The manager assigned with preparation of accounting and corporate documents, Luciano Garza, declares in accordance with
paragraph 2 article 154 bis of the Finance Act that the accounting information contained in this document corresponds to document
results, books of account and accounting entries.
pag
48
SNAI S.p.A.
Comparison of 2007-2006 income statement values
values in euro
2007
996.408.065
2006
619.078.755
7.498.818
5.415.957
1.325.916
520.357
Total operating revenue
Personnel expenses
EBITDA
EBIT
118.563
(724.271)
1.005.351.362
624.290.798
(12.043.586)
(3.804.854)
(879.006.391)
(535.944.810)
(7.867.321)
(15.343.946)
(30.279.307)
(10.156.927)
76.154.757
59.040.261
(38.060.348)
(31.164.697)
38.094.409
27.875.564
266.052
(62.417)
Financial income
4.731.499
1.816.990
Financial charges
(42.548.034)
(30.297.253)
(37.550.483)
(28.542.680)
543.926
(667.116)
5.284.698
(1.324.384)
5.828.624
(1.991.500)
PRE-TAX EARNINGS
Income taxes
pag
49
Financial statements at
31/12/07 and
explanatory note
ascoli - piazza del popolo
Financial Statements
SNAI S.p.A.
Income Statement 2007
values in euro
Notes
2.007
of which
of which
related parties
non-recurring
note 30 notes 32 and 33
2.006
of which
of which
related parties
non-recurring
note 30 notes 32 and 33
Revenue from sales and services 3 468.954.791 14.302.311
210.421.211 12.735.791 16.142.748
4
7.498.818 1.247.202
5.415.957 1.322.774
3.021.873
Increase of internally
generated assets
5
1.325.916
520.357
Change in inventories of finished
and semi-finished products
6
118.563
(169.695)
(724.271)
(267.782)
Used raw materials and
consumables
7 (12.043.586)
(120.998)
(3.804.854)
(65)
Costs for services and
leased assets
8(351.553.117) (83.060.916) (2.987.017) (127.287.266) (69.357.435) (6.006.953)
Personnel expenses
9 (7.867.321)
(158.255)
(15.343.946)
(191.835) (6.120.600)
10 (30.279.307)
(4.700.417) (10.156.927)
(602.307)
EBITDA
76.154.757
59.040.261
Depreciation and amortisation 11 (38.060.348)
(31.164.697)
EBIT
Income and charges from
equity investments
Financial income
Financial charges
Total financial charges
and income
38.094.409
Income taxes
27.875.564
266.052
(62.417)
4.731.499 1.038.257
1.816.990
(42.548.034) (1.471.701) (1.097.865) (30.297.253)
12 (37.550.483)
(28.542.680)
543.926
(667.116)
5.284.698
(1.324.384)
5.828.624
(1.991.500)
PRE-TAX EARNINGS
13
(1.389.060)
pag
53
518.680
(2.563.290)
146.024
22.237
(22.511)
SNAI S.p.A.
Balance sheet at 31 December 2007
values in euro
Notes
31/12/2007
of which
related parties
note 30
31/12/2006
14
120.067.588
16.495.504
136.563.092
113.175.681
3.898.669
117.074.350
15
225.110.343
235.801.052
460.911.395
225.110.343
151.047.305
376.157.648
5.060.136
588.488
5.648.624
0
13.579.529
2.080.203
618.782.843
4.604.153
542.008
5.146.161
0
10.276.635
1.965.231
510.620.025
of which
related parties
note 30
ASSETS
Noncurrent assets
Goodwill
Equity investments in subsidiaries and associates
Prepaid taxes
Current assets
Inventories
Accounts receivable
Other assets
16
17
20
18
19
20
21
22
16
TOTAL ASSETS
14.018.366
51.354.586
31.415.667
20.184.616
89.232.071
30.987
206.236.293
5.957.223
5.115.947
4.939.318
14.206.525
48.697.229
13.885.991
6.356.938
253.699.717
0
336.846.400
825.019.136
847.466.425
60.748.992
263.232.239
5.828.624
329.809.855
60.443.218
264.019.753
-1.991.500
322.471.471
370.995
3.869.250
3.822.197
6.339.415
LIABILITIES AND SHAREHOLDERS’ EQUITY
Share capital
Reserves
Total Shareholders' Equity
Deferred taxes
Current liabilities
Accounts Payable
Other liabilities
23
24
25
17
26
27
1.570.139
313.379.967
43.192.137
7.311.516
13.847.291
379.301.050
28
27
27.236.382
56.013.074
13.838.306
18.820.469
32.658.775
115.908.231
25
825.019.136
pag
54
14.425.903
952.082
6.018.485
4.525.043
313.373.878 18.494.720
51.105.422
2.825.680
19.542.026
391.372.049
27.757.881 2.199.214
50.675.943
43.057.658 33.369.960
12.131.423
55.189.081
133.622.905
847.466.425
pag
55
Balance at 31/12/07
Share capital increase
Share capital increase expenses
Allocation of 2006 profit
Profit (loss) at 31/12/07
Total income/charges recorded in year
Changes to equity for 2007
Foreign exchange translation
differences from foreign operations
Balance at 01/01/07
Changes in classification policy
Adjusted balances
23
23
23
23
Merger of Ippodromi San Siro S.p.A.
(formerly Società Trenno S.p.A.) with SNAI S.p.A.
Balance at 31/12/06
Tot. income/charges recorded in year
Changes to equity for 2006
Balance at 01/01/06
Changes to accounting policy
Adjusted balances
60.749
306
60.443
60.443
60.443
1.268
1.268
1.268
1.268
1
1
1
1
Share capital Extraordinary Extraordinary
Capital
Reserve
for
1
60.443
1.268
1
0
0
0
85
31.788
1.268
1.268
28.570
28.570
1.268
28.570
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY AT 31/12/07
Share capital Extraordinary Extraordinary
Notes
Capital
Reserve
for
SNAI S.p.A.
211.319
3.743
(1.379)
208.955
208.955
208.955
Extraordinary
Reserve
208.955
215.792
(6.837)
0
0
0
Extraordinary
Reserve
757
(142)
899
899
899
Extraordinary
Law 72 of
19/03/1983
899
899
0
0
0
Extraordinary
Law 72 of
19/03/1983
966
966
0
0
0
27.105
27.105
0
0
0
8.479
23.610
15.131
15.131
15.131
91
3.420
(633)
(4.144)
(4.144)
(4.144)
(11.899)
(1.992)
(1.992)
9.907
11.899
11.899
0
(1.850)
1.850
1.850
1.850
966
966
966
966
27.105
27.105
27.105
27.105
22.449
22.449
23.610
(1.161)
22.449
(633)
(633)
(633)
(633)
5.829
1.992
5.829
3.837
(1.992)
(1.992)
Extraordinary Extraordinary Extraordinary Extraordinary Retained earnings Profit (loss)
Law 413 of
Reserve
Reserve
Reserve
(Losses
for
30/12/1991
carried forward)
year
1.850
1.850
0
0
0
Extraordinary Extraordinary Extraordinary Extraordinary Retained earnings Profit (loss)
Law 413 of
Reserve
Reserve
Reserve
(Losses
for
30/12/1991
carried forward)
year
329.810
4.049
(1.379)
0
5.829
327.140
322.472
(1.161)
321.311
Total
Shareholders’
Equity
30.997
0
322.472
247.580
(6.837)
(1.992)
50.732
52.724
52.724
Total
Shareholders’
Equity
SNAI S.p.A.
Cash Flow Statement
Notes 31/12/2007
11
17
26
(Capital gains) capital losses on sale of noncurrent assets
(including equity investments)
Net change in noncurrent trade and other assets
and liabilities and other changes
20-27
Net change in current trade and other assets and
liabilities and other changes
18-19-20-27-28
24
14
- goodwill
- concessions
- determined payables due to AAMS
- deferred taxes on company branch acquisition
15
16
21
Payment collected for sale of equity investments in subsidiaries,
net of transferred liquid assets
CASH FLOW GENERATED (ABSORBED) FROM INVESTMENT
ACTIVITIES (B)
B1 CASH FLOW GENERATED (ABSORBED) FROM MERGER (B1)
B2 CASH FLOW GENERATED (ABSORBED) FROM TRANSFER (B2)
25
25
25
Other S.E. changes
25
D. CASH FLOW FROM DISPOSED ASSETS/AVAILABLE-FOR-SALE ASSETS
E. TOTAL CASH FLOW (A+B+B1+B2+C+D)
H. FINAL NET FINANCIAL ASSETS (FINAL NET FINANCIAL
BORROWING) (E+F+G)
22
PAYABLES AT THE BEGINNING OF THE PERIOD, BROKEN DOWN
AS FOLLOWS:
Bank overdraft facilities
PAYABLES AT THE END OF THE PERIOD, BROKEN DOWN AS FOLLOWS:
Interest expense paid in 2007 totalled around 30,400 thousand euro
Taxes paid in 2007 totalled around 2,210 thousand euro
pag
56
of which 31/12/2006 of which
related parties
related parties
note 30
note 30
5.829
38.060
(11.216)
4.486
(1.992)
31.165
2.923
(594)
0
0
0
0
(5.810)
371
(7.172)
(371)
(14.266)
(2.955)
14.128
(2.581)
(3.006)
84
21.408
(2.410)
(26.768)
(3.090)
(116.456)
(533)
0
(13.828)
(213.750)
(172.812)
29.622
30.130
(766)
0
(485)
2.479
0
0
4
0
(157.581)
0
0
(328.672)
1.550
(6.135)
27.623
(9.159)
(40.989)
0
0
(1.161)
2.671
0
(21.015)
0
(164.468)
253.700
0
(39)
(31.382)
(4.477)
294.810
68.585
(40.564)
0
240.742
0
559.096
0
247.247
6.453
0
89.232
253.700
253.700
0
0
253.700
7.501
(1.048)
0
6.453
89.232
0
0
89.232
253.700
0
0
253.700
2.412
277
50.781
EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING STANDARDS
SNAI S.p.A. (hereinafter also referred to as “company”) has its registered office in Porcari (LU) – Italy – Via Luigi Boccherini, 39.
(a) General standards
The annual financial statements at 31 December 2007 were prepared based on the IFRS in effect as of that date, issued by the
International Accounting Standards Board and adopted by the European Commission.
The accounting standards used to prepare these annual financial statements are in compliance with the accounting standards used
to prepare the financial statements at 31 December 2006 with the exception of what is described below in the notes to the specific
items.
The IFRS are considered also to be revised international accounting standards (IFRS and IAS) and all the interpretation of the
International Financial Reporting Interpretations Committee (IFRIC e SIC), adopted by the European Union. As required by paragraph
28 of IAS 8, the IFRS in effect as of 1 January 2007 are indicated and briefly described below.
IFRS 7 Financial instruments: disclosures
Requires information which allows users of financial statements to assess the significance of the company’s financial instruments
and the nature of risks associated with these financial instruments.
Amendment to IAS 1 Presentation of financial statements: information on capital
This modification requires the Group to provide new information which allows users of financial statements to assess the company’s
objectives, policies and processes for managing capital. The required information is included in the notes.
IFRIC 7 Applying the restatement approach under IAS 29 “Financial reporting in hyperinflationary economies”
The standard is not applicable to the company’s activities.
IFRIC 8 Scope of IFRS 2
The interpretation clarifies some aspects of IFRS 2 (share-based payments).
IFRIC 9 Reassessment of embedded derivatives
IFRIC 9 establishes that the date for assessing the existence of an embedded contract is the date when the entity becomes party
to a contract, with reassessment possible only if there is a change in the terms of the contract that significantly modify cash flow.
Since the company does not hold any derivative instruments, application of IFRIC 9 did not have impacts on the company’s financial
position or performance.
IFRIC 10 Interim financial reporting and impairment
IFRIC 10 requires that any entity not reverse an impairment loss recognised in a previous interim period for goodwill or an investment
in wither an equity investment held for sale or a financial asset carried at cost. Since the company did not reverse any previously
recognised impairment loss, this interpretation did not have impacts on the company’s financial position or performance.
IFRS and IFRIC interpretations not yet in effect
The company did not apply the following IFRS, IFRIC Interpretations and amendments, which are published but not yet in effect:
IFRS 8 Operating segment
Requires more information which allows users of financial statements to have a better understanding of management’s reporting.
The company is still evaluating the effects of these interpretations and related impact on its financial statements.
IFRS 3R Business combinations and IAS 27/R Consolidated and separate financial statements
The two revised standards have been adopted as of January 2008 and will become effective for the first financial year following
1 July 2009. IFRS 3R introduces some changes in accounting for business combinations which will have effects on the amount of
recognised goodwill, result for the year the acquisition takes place in and results for subsequent years. IAS 27R requires that a
change in the investment in a subsidiary be recognised as an equity transaction. Consequently, this change will not have an impact
on goodwill, and will not give rise to gains or losses. In addition, the revised standards introduce changes in accounting for a
loss incurred by a subsidiary as well as loss of control. The changes introduced by the standards IFRS 3R and IAS 27R must be
applied prospectively and will have impacts on future acquisitions and transactions with minority shareholders.
IAS 1 Revised Presentation of financial statements
The revised IAS 1 standard Presentation of financial statements was adopted in September 2007 and will become effective during
the first financial year after 1 January 2009. The standard separates the changes in shareholders’ equity attributed to shareholders
and non-shareholders. The statement of changes in shareholders’ equity will only include the details of transactions with shareholders,
while all the changes related to transactions with non-shareholders will be presented on a single line. Moreover, the standard
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introduces the “comprehensive income” statement: this statement contains all the income and cost items accruing during the period
recorded in profit and loss, and addition every other recorded income and cost item. The “comprehensive income” statement can
be presented as a single statement or in two correlated statements. The group is evaluating whether to prepare one or two statements.
Changes to IAS 32 and IAS 1 Held for sale financial instruments
The changes to IAS 32 and IAS 1 were adopted in February and will become effective in the first financial year after 1 January
2009. The change to IAS 32 requires that some held for sale financial instruments and bonds which occur at the time of liquidation
are classified as capital instruments if certain conditions are met. The change to IAS 1 requires that the explanatory notes include
some information related to held to sell options classified as capital. The company does not expect these changes to have an impact
on the group’s financial statements.
IAS 23 Reviewed – Borrowing costs
The revised IAS 23 requires the capitalisation of borrowing costs where they are referred to assets which justify their capitalisation
(qualifying assets). An asset which justifies capitalisation is an asset which requires a significant amount of time before being ready
for its intended use or sale. This standard will be applicable from the financial year starting 1 January 2009. The company is still
evaluating the effects of these interpretations and the related possible impact on its financial statements.
IFRIC 11 IFRS 2 – Treasury share transactions
IFRIC 11 requires accounting of agreements which grant employees rights on enterprise equity instruments such as stock option
plans if the enterprise acquires these instruments from a third party, or if it is the shareholders to provide the necessary equity
instruments. This interpretation became applicable starting on 1 March 2007. The adoption of this standard, which will occur on
1 January 2008, will not have any effect on the company’s financial position or performance, since the company currently does
not have any of this type of transactions.
IFRIC 12 Service concession arrangements
IFRIC 12 provides instructions on how to account for concessions granted by government or other bodies to private operators.
IFRIC 13 Customer loyalty programmes
IFRIC 13 provides accounting guidelines for a company that grants loyalty award credits (such as “points” or travel miles) for
customers who buy goods or services. This interpretation is applicable for financial years starting at 1 July 2008, but does not
regard the company.
IFRIC 14 IAS 19 – The limit on a Defined Benefit Asset, minimum funding requirements and the interaction
IFRIC 14 provides instructions on how to measure the economic benefit limit that can be recorded as assets in a Defined Benefit
Plan, in accordance with IAS 19 – Employee benefits The minimum funding requirement may cause effects on assets and liabilities
resulting from pension plans. This interpretation is applicable after 1 January 2008. The company is evaluating the effect that this
interpretation will have on the company’s financial statements once it is applied starting 1 Januar y 2008.
The statements adopted by the company for the financial year which closed at 31 December 2007 have been changed compared
to those adopted in the previous year, to better meet the provisions of IAS 1 and 7. The specific information is included in the
explanatory notes.
The company adopted the following statements:
Balance Sheet
The presentation of the balance sheet is through separation of current and noncurrent assets and liabilities and for each asset and
liability item the amounts expected to be settled or received within 12 months from the date of the financial statements.
Income Statement
The income statement records the items by nature, since it is considered to be the one which provides the most explanatory
information.
On 31.12.2007 the arrangement of the income statement was changed by eliminating the “operating revenue” item and reporting
in “revenue from sales and services” the change in fixed odd and totalisator odd sports and horse racing bets already net of winning
and reimbursements paid to betters, single tax accrued and withholdings on fixed and totalisator odd horse racing bets.
For more information, the directors’ report contains a comparison statement of the income values for 2007 in the same arrangement
as 2006 with comparative values. Adequate information on the adoption of the new arrangement is supplied in the notes to the
main income statement items.
Statement of changes in equity
The statement of changes in equity shows the financial year or period profit or loss, as well as each item of income and expense,
proceed or charge which, as required by the International Accounting Principles and their interpretations, is recognised directly in
equity, together with the total of those items; the total profit or loss for the period, separately showing the amount attributable to
equity holders of the parent and to minority interest; for each equity item the effects of changes in accounting policies and corrections
of errors as required by the accounting treatment in Internal According Standard no. 8. In addition the statement presents the balance
of accumulated profits or losses at the beginning and end of the period and movements for the period.
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Cash Flow Statement
The statement of cash flows presents the cash flows of operating activities, investing activities and financing activities. Cash flows
of operating activities are represented by the indirect method, where the profit or loss for the year is adjusted for the effects of noncash transactions, any deferments or accruals of previous or future receipts or operating payments, and income or cost items
connected with cash flows from investment or financial activities.
Compared to what was published in the financial statements at 31 December 2006, reclassifications have been made in order
to improve the classification of the items of the income statement and balance sheet, limited to the following items:
- 368,691 thousand euro related to winnings and reimbursements from “costs for services and leased assets” to “revenue from
sales and services”;
- 37,185 thousand euro related to single tax at fixed and totalisator odd horse race and sports bets from “costs for services and
leased assets” to “revenue from sales and services”;
- 2,782 thousand euro related to UNIRE withholding on fixed and totalisator odd horse race bets from “costs for services and leased
assets” to “revenue from sales and services”;
- 786 thousand euro related to fees for sureties from “costs for services and leased assets” to “financial charges”;
- 1,331 thousand euro from “equity investments in other companies” to “equity investments in subsidiaries and associates” related
to the equity investments in the associates Alfea S.p.A. and Capannelle;
- 1,732 thousand euro from “other current assets” to “trade accounts receivable” related to the Slot provision for bad debts;
- 32,388 thousand euro from “other current assets” to “trade accounts receivable” related to accounts receivable due from Slot
customers;
- 851 thousand euro from “liquid assets” to “trade accounts receivable” related to direct debiting issued to Slot customers;
- 1,284 thousand euro from “liquid assets” to “other current assets” related to direct debiting issued to concession operators.
(b) Basis of preparation
This annual report, with amounts expressed in thousands of euro, was prepared based on a general policy of historic cost, with
the exception of some property, land, plant and machinery measured at their deemed cost, as explained below, as well as for
derivatives (fixed rate bet) and equity investments in other companies carried at fair value.
To prepare the financial statements in compliance with the IFRS, management must make measurements, estimates and assumptions
which affect the application of the accounting standards that effect the amounts of assets, liabilities, costs and income recognised
in the financial statements. The estimates and related assumptions are based on previous experience and other factors considered
reasonable for the specific case and were used to estimate the carrying value of assets and liabilities, which is not easy to deduce
from other sources. However, it is important to point out that since these are estimates the final results may not necessarily be the
same as presented here.
These estimates and assumptions are regularly reviewed. Any changes resulting from a review of accounting estimated are recognised
in the period when the review was performed.
The key assumptions concerning the future and other important sources of uncertainty in estimates at the closing date of the financial
statements, which could cause significant adjustments in the carrying values of assets and liabilities by the end of the next financial
year are described below.
Value impairment on non-financial assets
As of the date of each financial statements, the company verifies if there are value impairment indicators for all non-financial assets.
Goodwill and other intangible assets with an indefinite useful life are tested annually for value impairment and if such indicators
exist during the year. The other non-financial assets are tested annually for value impairment when there are indicators that the
carrying value may not be recovered.
When the value in use calculations are prepared, the directors need to estimate the expected cash flows from the asset or cash
generating units and select an adequate discount rate in order to calculate the current value of these cash flows. Further details
and a sensitivity analysis of the key assumptions are indicated below.
Deferred tax assets
Deferred tax assets are recognised for unused tax losses, to the extent that it is probable the enough future tax profit will be available
against which the tax losses can be used. The directors are asked to make a significant discretional measurement to determine
the amount of deferred tax assets which can be recorded. They need to estimate the probable temporary manifestation and the
amount of further taxable profit as well as the planning strategy for future taxes.
Development costs
Development costs are capitalised based on the accounting standard described below. Initial capitalisation of costs is based on
the fact that management’s judgement on the technical and economic feasibility of the project has been confirmed. This normally
occurs when the project gas reached a precise phase of the development plan. To determine the values to capitalise the directors
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have to create assumptions concerning the expected future cash flows from noncurrent assets, discount rates to apply and the period
when the expected benefits will occur. At 31 December 2007, the best estimate for the carrying value of capitalised costs was
around 2,160 thousand euro.
(c) Accounting policies
(i) Equity investments in subsidiaries and associates
Equity investments in subsidiaries represent investments in the share capital of enterprises where SNAI S.p.A. exercises control.
This control exists when the company has the power to determine, either directly or indirectly, the financial and operating policies
in order to obtain the benefits results from its activities.
Associates are entities where the company exercises a significant influence on the financial and operating policies, despite not
having control.
IFRS 27, paragraph 37, requires that companies which must prepare consolidated financial statements indicate that equity investments
in subsidiaries and associates not held for sale can be accounted for at cost or in accordance with IAS 39 (at their fair value).
SNAI S.p.A. has decided to account for these equity investments based on the cost method. These equity investments are subject
to impairment testing any time there is a indication that the asset may have become impaired. If evidence exists that the equity
investments in subsidiaries and associates have undergone impairment, such impairment is recorded in the income statement. The
original value is only restored when the reasons for the write-downs cease to exist.
(ii) Transactions in foreign currency
Foreign currency transactions are translated at the exchange rate ef fective on the transaction date.
Monetary amounts in foreign currency at the financial statements reference date are translated into euro using the closing exchange
rate. Exchange rate differences resulting from translation are reported in profit and loss as financial income or charges. Nonmonetary items carried at historical cost are translated using the exchange rate in effect when the transaction is first reported. Nonmonetary items carried at fair value in foreign currency are translated using the exchange rate in effect when the fair values were
determined.
(d) Property, plant and equipment
(i) Owned assets
Property, plant and equipment is entered at cost or substitute cost, net of accumulated depreciation and value impairment (see
standard g). The cost includes any additional directly attributable costs and the initial estimate, where necessary, of the cost to
dismantle and remove the asset and restore the site where it was located and lastly, an adequate amount of production expenses
for internally constructed items.
Extraordinary maintenance and repair costs, which increase the useful life of property, plant and equipment, are capitalised and
depreciated based on the remaining possibility to use the asset. Other repair and maintenance costs are recorded in the income
statement when they are incurred.
If property, plant and equipment is composed of various components with different useful lives, these components are recorded
separately.
If events or changes in situations indicate that the carrying value may not be recovered, these are subject to testing and if the
carrying value exceeds the presumed realisation value (represented between the higher between sales price and use value), the
asset is written down.
(ii) Finance and operating leases
Finance lease assets which transfer substantially all the risks and benefits of ownership are classified as finance lease assets. Assets
used by the company, acquired by finance lease, are recorded at the fair value of the leased asset or, if less, at the current value
of minimum payments due for the lease, each calculated at the beginning of the contract, net of accumulated depreciation (as
indicated below) and value impairment (see standard g).
Cost for operating leases are recognised in the income statement on a straight-line basis for the duration of the contract.
(iii) Depreciation
Depreciation of property, plant and equipment is systematically charged to the income statement on a straight-line basis in relation
to the useful economic-technical life of related assets, defined as its useful life. Land is not depreciated. The following annual
depreciation rates are used:
• Buildings: 3% - 11%
• Plant and machinery: from 15% to 30%
• Other assets: from 12% to 100%
The residual value and useful life of the asset and methods applied are reviewed annually and adjusted as needed at the end of
each financial year.
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(iv) Derecognition
An asset is removed from the balance sheet when it is sold or no future benefits are expected from its use or disposal. The gain or
loss (calculated as the difference between proceeds from the sale and carrying amount) are included in the income statement for
the year when it is disposed.
(e) Intangible assets
(i) Goodwill
For acquisition of companies or company branches, the acquired assets, liabilities and potential liabilities are recognised at the
fair value at the date of acquisition. The positive difference between the acquisition cost and the fair value of these assets and
liabilities is entered in the balance sheet as goodwill and classified as intangible assets.
Any negative difference (“negative goodwill”) is entered in the income statement at the time of the acquisition.
Goodwill is considered an asset with an indefinite life and it is not amortised, but it is annually or more frequently (if specific events
of changed circumstances indicate impairment) tested to identify any impairment, according to IAS 36 – Impairment of Assets
(impairment test) conducted on the cash generating unit which management allocated the goodwill to. Any write-downs cannot
later be reversed.
(ii) Other intangible assets
The other intangible assets acquired or produced internally are entered as assets, as set forth in IAS 38 – Intangible assets, when
it is probable that use of the asset will generate future economic benefits and when the asset cost can be reliably determined.
These assets are initially recognised at acquisition or production cost and later net of amortisation, calculated on a straight-line
basis for the entire estimated useful life.
Research cost is recognised as expense at the time it is incurred.
Development costs, which require application of research results to a plan or project for the production of products or new or
substantially improved processes, are capitalised only after technical and commercial feasibility of the product or process and the
company has sufficient resources to complete its development. Capitalised costs include expenses for materials, direct manpower
and an adequate portion of general production costs.
The other development costs are recognised in the income statement for the financial year in which they are incurred. Capitalised
development costs are entered net of accumulated amortisation and value impairment (see standard g).
The costs for goodwill and internally generated brands, are recognised in the income statement in the period in which they are
incurred.
Subsequent costs for intangible assets are capitalised only when there is an increase in the expected future economic benefits
attributable to the assets they refer to. All other subsequent costs are recognised in the income statement for the period in which
they are incurred.
Concessions, licenses, trademarks and similar rights are capitalised only when there is an increase in the expected future economic
benefits attributable to the assets they refer to. All other subsequent costs are recognised in the income statement for the period in
which they are incurred.
(iii) Amortisation
Amortisation of intangible assets is charged to the income statement on a straight-line basis for their useful life, with the exception
of those with an indefinite life and goodwill which are not amortised, but for which the company regularly tests their value impairment.
However, this test is performed at the closing date of all financial statements.
Intangible assets with a finite useful life are amortised starting when the asset is available for use.
The following annual amortisation rates by type are used:
• development costs: from 20% to 33%
• industrial patent rights and licences to use original works: from 10% to 33%
• concessions, license, trademarks and similar rights: from 10% to 33%
• horse race and sports concessions and sports and horse race licences: based on the duration of the concession with expiration
between 31/12/2001 and 30/06/2016
• others: from 10% to 33%
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(f) Inventories
Inventories are measured at the lower between cost (acquisition or production) and market value, calculating the cost with the first
in – first out (FIFO) method. Recognition of warehouse inventories include direct costs of materials and labour and indirect costs
(variable and fixed). Write-down provisions are calculated for products considered obsolete or with slow turnover, taking into account
their future expected use and realisation value.
(g) Value impairment on non-financial assets
The Group annually tests the carrying value of its assets to identify any impairment. If, based on these tests, assets are discovered
to have undergone impairment, the group estimates the recoverable value of the assets.
The recoverable value of goodwill, indefinite life assets and intangible assets not yet available for use, is estimated at the closing
date of each balance sheet, even if there are no indications of impairment.
The recoverable value of is the greater of the fair value of the asset or cash generating unit, net of sales costs, and its use value.
The recoverable value is calculated per single asset, except when the asset generates cash flows which are not fully independent
from those generated by other assets or groups of assets.
Any impairment of cash generating units is first allocated to reduce the carrying amount of any goodwill allocated to the cash
generating units and then, reduce the carrying amounts of the other assets of the unit proportionally to each asset which is part of
the unit.
To determine the use value of an asset the accounting standard requires that the current value of estimated future cash flows be
calculated, pre-tax, by applying a discount rate that reflects current market assessment of the time value of money and the risks
specific to the asset An impairment loss is recognised if the recoverable amount is below the carrying amount. When later, an
impaired asset, other than goodwill, no longer exists or has reduced, the carrying amount of the asset or cash generating unit is
reversed.
(h) Reversal of impairment loss
Reversal of impairment loss for goodwill is prohibited.
With the exception of goodwill, the impairment of an asset is reversed when there is an indication that the impairment no longer
exists or when there has been a change in the measurement used to determine the recoverable value.
The carrying amount following a reversal should not be more than the carrying value that would have been determined (net
amortisation) of the impairment had not been recognised.
(i) Equity investment and other financial assets
IAS 39 covers the following types of financial instrument: financial assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments and available-for-sale assets. Initially all financial assets are recognised at fair value, increased in the
event of assets other than at fair value with changes for additional charges in profit and loss. The company determines the classification
of the financial assets at the time of their initial recognition.
(i) Equity investments and available-for-sale financial assets
Equity investments in other companies (with a holding less than 20%) are measured at fair value, with effects recognised in
shareholders’ equity; when their fair value cannot be reliably determines, the equity investments are carried at cost adjusted for
impairment, and recognised in profit and loss. The original value is only restored when the reasons for the write-downs recognised
in shareholders’ equity cease to exist.
The risk resulting from ay impairment exceeding shareholders’ equity is recognised in a specific provision for risks to the extent that
the investor company is committed to fulfilling legal or implicit obligations for the investee.
(ii) Other financial assets
Government bonds which the group intends to held until their natural maturity, having the ability to do so, are measured at amortised
cost net of impairment.
Other current financial assets include balances of financial accounts due from other companies subject to control by the same parent
company and non-consolidated subsidiaries.
(j) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments not quoted on an active market.
After initial recognition these assets are measured at amortised cost using the effective discount rate method net of any accruals
for impairment.
Current receivables were not discounted since the effect of discounting cash flows is irrelevant. Profit and loss recorded in the income
statement when the loans and receivables are derecognised or when impairment occurs as well as through the amortisation process.
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Fair value
For securities widely traded on active markets, the fair value is determined referring to the quoted market price recorded at the
end of trading on the closing date of the financial year. If a market for an investment is not active, the fair value is established using
a valuation technique based on: arm’s length transaction prices; current market value of another instrument that is substantially the
same, discounted cash flow analysis and option pricing models.
Amortised cost
Held-to-maturity financial assets and loans and receivables are measured at amortised cost. Amortised cost is calculated using the
effective interest rate net of any accruals for impairment. The calculation takes into account any premium or discount on the acquisition
and includes transactions costs and fees which are an integral part of the effective interest rate.
Impairment on financial assets
The Group assesses at each balance sheet date if a financial asset or group of financial assets is impaired.
If objective evidence exists that a loan or receivable entered at amortised cost is impaired, the amount of the loss is measured as
the difference between the carrying amount of the asset and the present value of estimated cash flows (including losses of future
credit not yet incurred) discounted at the asset’s original effective interest rate (or the effective interest rate calculated at the initial
recognition date).
The asset carrying value is reduced using a provision. The amount of the loss is recorded in the income statement.
If, in a subsequent period, the amount of the impairment loss decreases due to an event occurring after the impairment was initially
recognised, the previously recognised loss is reversed. Any subsequent reversals are recognised in profit and loss, to the extent
that the asset carrying value for not exceed the amortised cost on the reversal date.
In terms of trade accounts receivable, an accrual for impairment is made when objective evidence exists (for example a probability
of insolvency or significant financial problems of the debtor) that the company will not be able to recover all the amounts due at
the original conditions of the invoice. The carrying amount is reduced using a specific provision. Receivables subject to impairment
are reversed when they are unrecoverable.
(k) Cash and cash equivalents
Cash and cash equivalents include cash on hand, on sight deposits, current and highly liquid investments which are easily convertible
into cash and which are subject to an irrelevant risk or value change.
(l) Financial liabilities
Financial liabilities are initially recognised at fair value net of transaction costs. After initial recognition they are measured at amortised
cost, recording any difference between the cost and repayment amount in profit and loss for the duration of the liability, according
to the effective interest rate method.
Current payables are not discounted since the effect of discounting cash flows is irrelevant.
All profit and loss is recorded in the income statement when the liability is extinguished, as well as through the amortisation process.
Financial liabilities at fair value through profit and loss
Liabilities held for trading are those acquired for short term selling. Derivatives are classified as financial instruments held for sale
unless they are designated as effective hedging instruments Profit and loss on liabilities held for sale are recorded in the income
statement.
Derecognising financial assets and liabilities
A financial asset (or, where applicable, a part of a financial asset, or part of a group of similar financial assets) is derecognised
when:
• the rights to receive cash flows from the asset are transferred;
• the entity has retained the contractual rights to receive the cash flows from the asset, but has assumed a contractual obligation
to remit those cash flows on to a third party without material delay;
• the entity has transferred the rights to receive cash flows from the asset and (a) has substantially transferred all the risks and rewards
of ownership of the financial asset or (b) has not substantially transferred nor retained all the risks and rewards of the asset, but
has transferred its control.
A financial liability is removed from the balance sheet when the obligation underlying the liability is expired, cancelled or discharged.
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(m) Termination benefits (Italian TFR)
TFR is considered a defined benefit plan according to IAS 19. The liability related to the defined benefit programme, net of any
assets for the plan, is determined based on actuarial assumptions and is recorded based on consistent accrual for the services
needed to obtain the benefits; measurement of the liability is per formed by an independent actuar y.
As of 1 January 2007, the Finance Act and relative implementing decrees introduced significant changes in the rules governing
TFR, including the workers' choice of the destination for benefits earned to supplementary pension schemes, or “Treasury Fund”
managed by INPS (Italian Social Security).
Therefore the result, is that the obligation to INPS and contributions to supplementary pension schemes have assumed the nature
of a “Defined contribution plan” according to IAS 19, while the amount entered with the provisions for TFR maintain the nature of
a “Defined benefit plan”.
Gains or losses resulting from the actuarial calculation are recognised in the income statement as a cost or income.
(n) Provisions for future risks and charges
The company accrues a provision in the balance sheet when it has undertaken an obligation (legal or constructive) as the result of
a past event and it is probable that it will be necessary to use resources which product economic benefits to fulfil the obligation. If
the effect is significant the amount of the provisions is represented by the current value of estimated future cash flow discounted at
a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the liability.
(o) Leases
The definition of a contract as a lease transaction (or containing a lease transaction) is based on the substance of the contract and
requires assessing if fulfilment of the contract depends on the use of one or more specific assets or if the contract transfers the right
to use for the asset. A review is performed after the start of the contract only if one of the following conditions occurs:
1) there is a change in the contractual conditions, other than a renewal or extension of the contract;
2) a renewal option is exercised or an extension is granted, unless the terms of the renewal or extension are initially included in
the lease transaction terms;
3) there is a change in the condition according to which fulfilment depends on a specific asset; or
4) there is a substantial change in the asset.
Where a review is performed for situations 1, 3 or 4 above, the recognition of the lease starts or ends from the date the circumstances
change which gave rise to the review. Where a review is performed for situation 2 above, the recognition of the lease starts or
ends from the renewal or extension date.
For contracts signed before 1 January 2005, the start date is considered 1 January 2005 in accordance with the temporary
provisions of IFRIC 4.
Operating leases
Lease payments for operating leases are recognised as an expense in the income statement on a straight-line basis for the duration
of the contract.
Finance leases
Finance Lease contracts, which transfer substantially all the risks and rewards of ownership of the leased asset to the company are
recorded on the starting date of the lease at fair value of the leased asset, or if lower, at the current value of the lease payments.
Lease payments are apportioned between the principle and interest in order to obtain a constant rate of interest on the remaining
balance of the liability. Finance charges are booked directly to the income statement.
Recognised leased assets are depreciated over the shortest time period between estimated useful life and the duration of the lease
contract, if there is no reasonable certainty that the company will obtain ownership at the end of the lease.”
(p) Revenue and costs
Revenue are recognised to the extent that it is likely that economic benefits will flow into the company and their amount can be
reliably determined. Revenue is represented net of discounts, allowances and returns.
In particular, revenue for the sale of assets is recognised when the risks and rewards of ownership of the asset are transferred to
the buyer, the sales prices is established or determinable and collection is expected: this time generally corresponds to the date of
delivery or shipment of the asset.
Revenue from performance of services are recognised when the services are provided; in particular, revenue from computerised
services to agencies total 1.2% of the volume of bets received by the agencies and 13% of the games performed on amusement
machines (“slot machines”).
Revenue connected with concessions related to slot machines are recognised net of the tax withholding (PREU) and paid winnings
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(totalling 75% of played volume) and gross of fees to pay to managers and operators (totalling 11.5% of the games of which 6%
for BAP) as well as the payment for the concession to pay to AAMS, totalling 0.8% of the game volume).
As of 1 January 2007 amusement machine network licensees are owed 0.5% of game movement as a reverse of the AAMS
concession payment.
based on IAS 32 and 39 the collection of fixed odd and totalisator odd bets generates a financial liability which is measured
using the fair value method. Therefore the collection connected with the acceptance of fixed and totalisator odd bets (or bets related
to which the company sustains a risk resulting from winnings) is entered in the balance sheets under “Revenue from sales and
services” net of the costs for the single tax, the UNIRE withholding, winnings and reimbursements paid to bettors.
For greater clarity the income statement shows a detail of the movement net of cancellations of fixed and totalisator odd bets as
well as the related costs for winnings, reimbursements and taxes on bets.
Revenue connected with acceptance of totalisator horse racing bets are instead recognised based on the commission percentage
established by the agreement for operating the bets, on average around 11.8%.
Revenue and costs related to bets are recognised at the time the event is realised on which the bet is accepted.
Revenue for services is recognised on an accrual basis when the service is delivered.
Costs for services is recognised on an accrual basis when the service is received.
(q) Financial income and charges
Financial income and charges are recognised on an accrual basis, using the effective rate of interest.
(r) Income taxes
Income taxes include current and deferred taxes calculated on the taxable income of the company. Income taxes are recognised
in the income statement, with the exception of those related to transactions recognised directly in shareholders’ equity, which are
accounted for in shareholder’s equity.
Current taxes represent the estimate of the amount of income taxes calculated on the taxable income for the year, determined by
applying the tax rates in effect at the closing date of the financial statements.
Prepaid and deferred taxes are set aside using the so-called liability method on temporary differences between the carrying amount
of assets and liabilities entered in the balance sheet and corresponding values recognised for fiscal purposes, with the exception
of temporary differences recognised for the initial recording of goodwill, initial recording of assets and liabilities which do not affect
booked profit or taxable income and differences related to investments in subsidiaries for which it is probable, in the predictable
future, that the temporary difference will not reverse.
Prepaid tax assets and deferred tax liabilities are measured using the tax rates expected to be applied during the year when the
asset will be realised or the liability will be settled that they refer to, based on the tax rates established by current provisions of
substantially in effect at the financial statement reference date.
Prepaid tax assets are recorded to the extent that it is probable that there will be a future taxable income against which these assets
can be used, including based on company budgets and tax policies. The carrying amount for prepaid tax assets is reduced to
the extent that it is not longer probable that the related tax benefit is realisable.
(s) Available-for-sale assets and transferred operating assets
The Company measures a noncurrent asset (or group being disposed of) classified as available-for-sale at the lower of its carrying
amount and fair value net of sales costs. Impairment after the initial measurement of an asset classified as available-for-sale are
recognised in profit or loss, even if the assets have been revalued. The same treatment applies to profit and loss on its next
measurement.
A transferred operating asset is a company component which represents an important independent branch of activity or activity
geographical area or is a subsidiary exclusively acquired to be resold. An operating asset is classified as transferred at the time
of the transfer or when it meets the condition for the classification in the “available-for-sale” classification, if earlier. Even a group
being disposed of can be under transferred operating asset.
2. AGREEMENTS FOR CONCESSION SERVICES
SNAI S.p.A. holds the following concessions:
• “Concession Agreement for assignment of activation and operation of the computerised management network for legal gaming
through amusement machines as well as connected activities and functions”. Expiration date: 31 October 2010 unless extended
by AAMS for up to another year. Transfer of assets required under article 15 .
• “Concession for the assignment of public activities and functions related to “concorsi pronostici” (pools) as well as other possible
games connected to sports events”, expired 30 June 2007 and later extended until 31 December 2007. This concession expired
on 31.12.2007.
pag
65
The activity connected to this concession will be performed starting on 1 January 2008 by the concession holders of the socalled Bersani Licences (from article 38 paragraphs 2 and 4 of the Italian Decree Law no. 223 of 4 July 2006 converted with
modifications and integrations by Law no. 248 of 4 August 2006) and holders of all the other concessions for horse racing
and sports bet collection.
• 218 concessions for “sale of fixed odd bets on sports events, other than horse races, and non-sports events” whose expiration
date is scheduled for 30/06/2012.
• 98 concessions for “sale of totalisator bets and horse race fixed odd bets” whose expiration date is scheduled for 30/06/2012.
• 134 concessions for “conducting horse race fixed odd and totalisator bets” whose expiration date is scheduled for 31/12/2011
(historic horse race concessions).
• “Concession to conduct public gaming as per article 38, paragraph 4 of the Decree Law no. 223 of 4 July 2006 converted
with modifications and integrations by Law no. 248 of 4 August 2006, published in supplement no. 183/L to the Official
Gazette of the Republic of Italy no. 186 of 11 August 2006”. The subject matter of this concession are the activities and functions
for conducting public gaming for horse races, through the activation of distribution networks and related management.
• The concessions described above entail the public gaming as follows:
a) totalisator horse racing bets;
b) fixed odd horse racing bets;
c) totalisator bets;
d) sports “concorsi pronostici”;
e) totip;
f) ippica nazionale;
g) remote skill games;
h) all other public gaming based on horse racing, which AAMS deems at any time to want to market through the network of
horse racing shops and/or network of horse racing points and/or network of remote horse racing.
The public gaming above, which can be marketed by each distribution network includes:
a) with reference to the network of horse racing shops, those under letters a), b) c) d), e) f), h);
b) with reference to the network of horse racing points, those under letters c), d), e), f), h);
c) with reference to the network of remote horse racing, those under letters a), b) c), d), e) f), g), h).
AAMS may suspend, at its own discretion and without any indemnity for the licensee, at any time during the period of validity
and effectiveness of the concession, the sale of one or more public gaming types cited above.
The expiration date of the concession is scheduled for 30.06.2016 based on the AAMS Directorial Decree of 7.09.2007
prot. no. 2007/49/R/Giochi/UD
• Awarding of the right for activation of the remote horse racing network.
• “Concession to conduct public gaming as per article 38, paragraph 2 of the Decree Law no. 223 of 4 July 2006 converted
Gazette of the Republic of Italy no. 186 of 11 August 2006”. The subject matter of this concession are the activities and functions
for conducting public gaming for events other than horse races, through the activation of distribution networks and related
management.
The concessions described above entail the public gaming as follows:
a) fixed odd bets;
b) totalisator bets;
c) sports “concorsi pronostici”;
d) totip;
e) ippica nazionale;
f) remote skill games;
g) all other public gaming based events other than horse racing, which AAMS deems at any time to want to market through
the network of sports gaming shops and/or network of sports gaming points and/or network of remote sports gaming.
AAMS may suspend, at its own discretion and without any indemnity for the licensee, at any time during the period of validity
and effectiveness of the concession, the sale of one or more public gaming types cited above.
• Awarding of the right for activation of the remote sports gaming network.
pag
66
EXPLANAT ORY NO TES FOR THE MAIN ITEMS OF THE INCOME STATEMENT
The comparison of values is performed with the previous corresponding balances at 31 December 2006 and the balances always
expressed in thousands of euro, except in individual cases where otherwise indicated.
The structure of the income statement for the current 2007 financial statements was adopted following a specific petition to the
Italian Tax Office which confirmed that there would be not tax assessment consequence for the company from adopting the new
structure which requires, among other things, the elimination of “Operating revenue” and the recognition in “Revenue for sales and
services” of the fixed odd sports bets and fixed odd and totalisator odd horse racing bets, already net of winning and reimbursements
paid to bettors, single tax and Unire withholding.
For a better understanding of the comparison values, it is important to note that in the previous year, following the merger of the
horse race track company San Siro S.p.A. (formerly Trenno S.p.A.), completed on 25 October 2006, with accounting effects as
of 01.01.2006, the income statement included the economic effects of the company branch called “horse race track management”
of the company Ippodromi San Siro S.p.A. spun-off on 19 September 2006 in favour of the company Trenno S.r.l.
3. REVENUE FROM SALES AND SERVICES
The amount of revenue from sales and services increased compared to the same period of 2007 rising to 468,955 thousand euro
from 210,421 thousand euro, broken down as follows:
thousands of euro
2007
2006
Net revenue for fixed odd and totalisator odd bets
99,485
Revenue from totalisator horse racing bets
80,123
Revenue from commissions on horse racing totalisator and ippica nazionale 5,465
Revenue from event outcome contests
390
Revenue from bet collection services BAP customers
12,855
Revenue from computerised bet collection services BAP customers
1,148
Revenue from Slot Machines
231,111
AAMS grant – Slot Machine Concession
8,950
Revenue from Bingo services
98
Revenue from set-up and technology sales
13,500
Revenue from Assistance Contracts and Technical Operations
1,237
Services for Circuito Gold
1,970
Revenue from exercise of licences
6,053
Corner customer services
844
Revenue from Trademark use
297
Revenue from Horse Racing Company Lease
5,196
Revenue from advertising campaigns and sponsorships
14
Other revenue from services and charge backs
219
Revenue from use of property and various plants
Revenue from bet management at horse race tracks
Revenue from television services
Total
468,955
change
66,329
65,775
5,968
528
18,425
984
25,654
98
6,871
1,232
718
309
1,439
198
292
2,429
12,309
863
33,156
14,348
503
138
5,570
164
205,457
8,950
6,629
5
1,252
6,053
844
12
3,757
184
73
2,429
- 12,309
863
210,421
258,534
The table below shows the breakdown of “Net revenue from collection of fixed odd and totalisator odd bets” which shows the
items related to winnings and reimbursement of bets at fixed odds paid to bettors, and the items related to the single tax and horse
racing withholding, which, as required by IAS 32 and IAS 30, are reclassified to decrease the value of revenue from sales and
services, unlike the income statement closed at 31 December 2006, where the revenue was represented gross of the aforesaid
items:
values in euro
2007
Revenue from Fixed Odd Sports / Car – Motorcycle Bets
586,752,068
Winnings and Reimbursements for Fixed Odd Sports and Car – Motorcycle Bets(457,349,896)
Single Tax on Fixed Odd Sports and Car – Motorcycle
(34,573,510)
Net Fixed Odd Sports/Car – Motorcycle Bets
94,828,662
Revenue from FO Horse Racing and Totalisator Odd Horse Racing
40,185,967
Horse Racing FO and Totalisator Odd Winnings and Reimbursements(29,889,568)
Single Tax on Fixed Odd and Totalisator Odd Horse Racing Bets
(1,855,099)
Cost of Horse Racing withholding
(3,785,201)
Net Fixed Odd and Totalisator Odd Horse Racing Bets
4,656,099
Total Net Bet Revenue at FO and TO
99,484,761
pag
67
2006
446,112,204
(347,751,397)
(35,820,975)
62,539,832
28,874,827
(20,939,208)
(1,363,605)
(2,782,358)
3,789,656
66,329,488
Net revenue from bet acceptance at fixed and totalisator odds (BAP) totalled 99,485 thousand euro for 2007, against 66,329
thousand euro at 31 December 2006; revenue from totalisator (BAP) horse racing bets totalled 80,123 thousand euro for 2007,
against 65,775 thousand euro at 31 December 2006; both entries are mainly the result of direct management of horse racing
and sports bets started on 16 March 2006 with the acquisition of 450 company branches for horse racing and sports concessions
and it increased starting at the end of the first half of 2007 in part thanks to the opening of new horse racing and sports gaming
licences (corners and shops) resulting from the awarding of concessions from the so-called Bersani call for tenders.
The “Revenue from exercise of licences” item totalling 6,053 thousand euro contained the payments of the first activation for sports
and horse racing corners with the stipulation of new management contracts.
The revenue from totalisator horse racing bets (BAP), totalling 80,123 thousand euro, represent a percentage of the volume on
collected bets established by law.
Revenues from customer services (third party licensees) totalled 12,855 thousand euro (18,425 thousand euro), the decrease of
5,570 thousand euro is mainly due to a change in corporate strategy which, with the acquisition of 450 company branches,
passed from only service provider to betting licensee and, consequently, with the acquisition of customer concessions, SNAI lost
the related revenue of 1.20% for the provider service to the 450 concessions from the date of the acquisition; moreover, a drop
was recorded in horse racing bets witnessed also on a national level.
The increase in revenue resulting from the concession to run the network of amusement machines paragraph 6 (Slot machines) for
205,457 thousand euro is due to the new accounting method used for them, adopted following issue of a decree on 17/05/06
from the Director General of the Amministrazione Autonoma dei Monopoli di Stato published in the Italian Official Gazette of
07/07/06 which defines the “Requirements of third parties assigned to collect (TIR) bets through machines with cash winnings”.
The new contracts became effective 01/01/07, both with managers (assigned third parties) and operators, implementing the
instructions of the decree.
The revenue recognised at 31 December 2007 totalled 13% of the movement generated by Slot Machines and thus are expressed
gross of the compensation contractually recognised to the manager – TIR – and operator. These costs are shown in the item costs
for services and leased assets in note 8.
Revenue from sales and services in 2007 included 8,940 thousand euro for the recognition of 0.5% of gambled sums in that period
with amusement machines (slot machines), as compensation, required by article 2, paragraph 530, letter c) of Law 266/2005
(2006 Financial Act), paid to computerised network licensees.
The Lazio regional administration T.A.R court granted the petitions submitted by some concessionaries. Deeming the continued inertia
of AAMS to be unjustified, it demanded AAMS pay the compensations. With this ruling, the Lazio regional administration court
confirmed the right due to licensees for what was determined with the 2006 Financial Act.
Lastly, in the draft decree prepared by AAMS, for the purposes of revising the slot machine convention, the provision of the granted
accruable up to 0.5% of the collection, has been entered in the new convention between AAMS and the licensees as a contractual
element.
The value of the grant, may vary based on a series of service and investment parameters. In its current state, the draft decree which
determines the parameters for paying the convention grant is at the European Commission which is preventively assessing, among
other things, if the compensation as per article 1, paragraph 530 of Law no. 266/2005 may possibly be considered as State
aid not allowed under EU law.
Based on the opinions of legal experts does no believe that risks exist such as to define the above proceeds as State aid. Moreover,
based on the opinions of technical consultants it feels that the service levels reached as enough for recognition of the entire proceeds
in revenue.
Revenue from set-up and technological and furniture sales totalled 13,500 thousand euro and was mainly due to gaming terminals
produced for the new points of sale. The item also includes 11,544 thousand euro of internal production technologies which are
the subject of rental contracts (lease-back) recorded under “property, plant and equipment” as described in note 14.
This amount accounts for around 2% of all revenue from sales and services.
During the previous year the revenue from sales and services its recorded total revenue of 16,143 thousand euro due to effect of
the merger.
pag
68
4. OTHER REVENUE AND PROCEEDS
At 31 December 2007, the amount of other revenue and proceeds totals 7,499 thousand euro (5,416 thousand euro at 31
December 2006).
This item contains the following positive income items:
thousands of euro
2007
Revenue from Services and charge backs to group companies
Rental income and charge back of accessory expenses
Revenue from compensation for damages and insurance reimbursements
Sale of option rights
Other revenue and proceeds
Income transactions
Revenue from asset capitalisation
Proceeds from horse race track management
Over provisions
Total
915
377
1,970
169
1,158
1,166
101
1,643
7,499
2006
803
827
92
698
119
402
340
2,135
5,416
difference
-
-
112
450
1,878
169
460
1,047
301
1,303
2,135
2,083
It is important to note:
- the amounts received as payment for damages following the settlement of arbitration hearings with some horse racing and sports
betting licensees for 1,970 thousand euro;
- settlement income for 1,166 thousand euro basically referred to the settlement of potential lawsuits on open contracts.
- the proceeds due for the so-called customisations of the metropolitan Horse Race Tracks accrued by the merged company Ippodromi
San Siro S.p.A. (formerly Trenno S.p.A.) for the years from 2005 until the date of 19 September 2006, date the Ippodromi San
Siro “Horse Race Track management” company branch was conferred to the Trenno S.r.l. company for a total of 1,643 thousand
euro;
- the apportioned payment of 169 thousand euro related to the transfer to others of the option right for the acquisition of the Milano
San Siro property complex, with the exception of the gallop race track.
The “other revenue and proceeds” item includes, among other things, the charge back of expenses to third parties for 594 thousand
euro.
Services and charge backs to group companies are shown in the table below:
2007
Immobiliare Valcarenga
MacHorse
SNAI Servizi S.r.l.
Trenno S.r.l.
Teleippica S.r.l.
Festa S.r.l.
Total
13
33
77
297
216
279
915
2006
13
33
82
50
267
358
803
difference
- 5
247
- 51
- 79
112
During the previous year the “other revenue and proceeds” item recorded total revenue of 3,022 thousand euro due to effect of
the merger.
5. INCREASE OF INTERNALLY GENERATED FIXED ASSETS
Increases of internally generated fixed assets, totalling 1,326 thousand euro (520 thousand euro) are related to the development
of:
• Betsi 2006 system;
• SLOT system – new messages and Paragraph 6A;
• odds and information display system for Bersani corners and shops;
• computerised system, related to computer and remote gaming acceptance terminals;
• gaming software for upgrading to new sports bet acceptance protocol (PSR), established by AAMS which became effective
on 2 April 2007;
• central systems: sports and horse racing betting protocol (PSSI) and ABMS system for gaming control;
• prototypes and preseries for the creation of a “Design System SNAI” for Shops and Corners to set up following awarding of
the new Bersani Decree licences.
pag
69
6. CHANGE IN INVENTORIES OF FINISHED AND SEMI-FINISHED PRODUCTS
The change in inventories of finished and semifinished products totalling 119 thousand euro is due to the increases in final inventories
of finished products recorded following the production of gaming terminals (Betsi, Punto SNAIWeb Small, Large and BiBest) intended
for the new points and corners awarded with the 2006 calls for tenders.
7. USED RAW MATERIALS AND CONSUMABLES
The used raw materials and consumables total 12,044 thousand euro (3,805 thousand euro) and mainly refer to the raw material
used to produce the new gaming terminals (Betsi, Punto SNAIWeb Small, Large and BiBest).
8. COSTS FOR SERVICES AND LEASED ASSETS
These totals 351,553 thousand euro (127,287 thousand euro), the breakdown is shown in the table below.
thousands of euro
2007
Utilities
Maintenance
Technical assistance
Advertising and PR
Designing and set-up costs
Sales expenses
Expenses for installations and high security
Outsourced processing and logistics management
Bookmaker fees
Consultation and expense reimbursement
Freelancers and other
Telephone and postal expenses
Help Desk Costs, Festa Switchboard
Payment for bet acceptance management
SNAI Card service costs
Slot Machine service costs
Directors’ fees and expense accounts
Auditors’ fees and expense accounts
Independent Auditors’ fees
Insurance policy costs
Bill Creation
Television Services
Services from group companies
Other services
Costs for horse race track management and services
Horse racing agency grants
Rental expense and accessory expenses
Rentals
Operating Leases
Total
565
1,812
2,442
8,679
415
147
826
1,530
1,800
6,385
254
4,442
2,300
102,746
4,852
203,187
629
122
378
294
666
395
595
1,648
589
295
3,560
351,553
2006
1,103
3,036
1,280
4,448
125
145
484
619
1,812
3,041
375
3,960
1,882
82,255
2,200
10,731
1,108
141
306
432
693
591
1,489
1,875
307
555
282
2,012
127,287
change
-
-
-
-
538
1,224
1,162
4,231
290
2
342
911
12
3,344
121
482
418
20,491
2,652
192,456
479
19
72
138
27
395
4
159
1,875
307
34
13
1,548
224,266
A significant part of the increase in costs for 224,266 thousand euro is due to the “cost for slot machine services” which at 31
December 2007 totalled 203,187 thousand euro compared to 10,731 thousand euro at 31 December 2006. In the current year
the cost for Slot machine service, due to the different accounting for the business, explained in detail in the revenue section (note
3), includes both the compensation for the manager (assigned third party) and the compensation for the operator, including the
fees due to the BAP for SNAI owned Slot Machines.
The direct costs for accepting horse racing and sports bets include the amounts due to the BAP. The BAP that have transferred to
concessions are due a management payment for acceptance of bets and services connected with collection of bets totalling 8%
of the movement of collection in the agency and 6% on computerised gaming. The BAP and other participating points are also
recognised a payment totalling 10% of the recharges made at the point of sale. The total payment of 102,671 thousand euro
paid to the BAP and participating points of sale is calculated based on specific contracts.
The direct management activity of the concessions started 16 March 2006 with the acquisition of “horse racing/sports concessions”
company branches and increased with the activation of horse racing and sports licences connected to the awarding of the socalled Bersani call for tenders.
pag
70
The increase in costs related to “Advertising and PR”, for 4,231 thousand euro, is mainly due to the advertising campaign to spread
awareness of the “SNAI brand” and new public and institutional relations especially aimed at new potential bettors.
The consultation item contains costs for participation in the Superenalotto call for tenders for 2,203 thousand euro.
Costs for “operating leases” totalling 3,560 thousand euro (2,012 thousand euro) are related to lease payments due for the year
2007 for contracts for the use of IT and digital equipment; the increase in this item is connected to the stipulation of new contracts
to enhance central system hardware, and make terminals and machines available in the gaming points for activation of the socalled Bersani licences.
The other services item mainly includes: security and armoured car service, cleaning services, inter-group services rebilled by the
parent company and other sister companies, postal and shipping expenses, rubbish costs, IT services and management of vehicles.
During the previous year the “costs for services and leased assets” item recorded total costs of 6,007 thousand euro due to effect
of the merger.
Remuneration for directors and statutory auditors
At 31 December 2007, this item included the remuneration owed to directors, totalling 600 thousand euro (987 thousand euro
at 31 December 2006 of which 387 thousand euro accrued in the merged company Ippodromi San Siro S.p.A.) and remuneration
for the statutory auditors, totalling 105 thousand euro (133 thousand euro at 31 December 2006 of which 28 thousand euro
accrued in the merged company Ippodromi San Siro S.p.A.).
To date no change in the remuneration to the members of the board of directors of SNAI S.p.A. has been voted on following
completion of the acquisition of “concession” company branches.
The remuneration paid to the directors and statutory auditors of the parent company in 2007 by SNAI S.p.A. and its subsidiaries,
is reported in attachment 3 of the notes to these financial statements as required by annex 3C – table 1 of Consob resolution no,
11971 of 14.05.1999 “regulation implementing Legislative Decree no. 58 of 24.02.1998”
9. PERSONNEL EXPENSES
The cost of personnel at 31 December 2007 totalled 7,867 thousand euro, against 15,344 thousand euro for the same period
in 2006, with a decrease of 7,477 thousand euro as shown in detail in the table below:
thousands of euro
2007
Salaries and wages
Social security contributions
Accrual for defined benefit plan
Reimbursement for expenses and travel
Training costs
Meal vouchers and company canteen
Total personnel costs
2006
change
7,564
2,201
- 2,347
239
18
192
11,136
2,928
780
204
5
291
- 3,572
727
- 3,127
35
13
99
7,867
15,344
- 7,477
During the previous year the “personnel costs” item recorded total costs of 6,121 thousand euro due to effect of the merger.
The “accrual for defined benefit plan” includes the profit and loss effects from measurement of termination benefits as per IAS 19.
The decrease is due to the recalculation (so-called curtailment) of the termination benefits due to a change in Italian law which
requires companies with more than 50 employees, to allocate the amounts of termination benefits accruing in the period to pension
funds managed by others (industry funds, National burrean for Social security INPS, insurance companies, banks, etc.).
The size of the staff at the end of the period is illustrated in the table below. It shows an increase of 22 units compared to 31
December 2006, mainly due to increase in staff in operating departments, to support the expansion in activities resulting from direct
management of the acquired concessions, including following the October 2006 call for tenders of October, and development
31.12.2006
Executives
Workers
Total Employees
15
182*
4
201
Started
in period
Left
in period
67
5
72
46
4
50
* of which 15 part-time and 8 on maternity leave
** of which 12 part-time and 6 on maternity leave
pag
71
31.12.2007
Average size
for period
15
203**
5
223
15
192,5
4,5
212
10. OTHER OPERATING EXPENSES
Other operating expenses totalled 30,279 thousand euro (10,157 thousand euro) and are broken down as follows:
thousands of euro
2007
PR material
Representation expenses
Donations and expenses for charity
Accruals for bad debts and losses on receivables
Accrual to provision for risks
Use of provision for risks
Other duties and taxes
Property tax
Concessions and Licenses
Administrative and other expenses
% Non-deductible Vat
Consumables and stationery
Subscriptions and purchase of magazines and periodicals
Ordinary expense settlements
Penalties and compensation for damages
Association dues
Ordinary capital losses
425
489
152
1,623
4,700
369
467
16,856
157
4,005
188
15
70
147
614
2
Total
30,279
2006
-
change
131
265
229
449
45
1,110
394
465
6,321
276
1,271
150
25
810
175
127
134
294
224
77
1,174
4,655
1,110
25
2
10,535
119
2,734
38
10
740
28
487
132
10,157
20,122
The licences and concessions item includes the following:
• Concession payments for legal gaming with amusement machines (“slot machines”) for 14,179 thousand euro, calculated every
fifteen days for 0.80% of the gambled volumes;
• payment for the 2006/2007 football season for the event outcome contest concession expired on 30 June 2007 and extended
until 31 December 2007 for 249 thousand euro;
• the concession payment, for 1,819 thousand euro, for the sale of fixed odd bets on sports events, other than horse racing, and
non-sports events as per article 4 of the convention approved with Directorial Decree 2006/22503 of 30/06/06; this decree
established that starting January 2007 the licensee is required to pay AAMS the six month concession payment for the six months
in progress by 16 January and 16 July of each year;
• the portion of concession payment accrued on public gaming for the year 2007 on licences awarded with the 2006 call for
tenders, as required by the concession, totalling 609 thousand euro.
In 2007 accruals were made to the provision for risks totalling 4,700 thousand euro to adjust the provision for risk to the amount
exceeding the value of the equity investments in relation to the greater losses of the subsidiary Teseo S.r.l in liquidation (394 thousand
euro) and sister company Tivù + in liquidation (950 thousand euro) as well as allocations for various lawsuits underway both as
plaintiff and defendant (2,532 thousand euro) and allocation related to technological upgrading as required by article 19 of the
“Specifications” for “assignment of concession for the activation and operation of the computerised management network for legal
gaming using amusement entertainment machines as well as connected activities and functions” from the start of the concession
(824 thousand euro).
Accruals were also made to the provision for bad debt for 1,322 thousand euro to adjust the provision to the current possibility of
realising receivables.
The “% non-deductible VAT” includes the cost of non-deductible VAT since SNAI S.p.A. performs distinct types of activities which
partly general revenue for services taxable in terms of VAT and partly revenue exempt from VAT, with consequent effect on nondeductibility of VAT on purchases.
SNAI S.p.A. has opted for activity separated for the purposes of VAT; this decision means that for purchases referred activity that
generates taxable operations, VAT is entirely deducted, while it is entirely non-deductible on those purchases referred to activities
which generate exempt operations.
In terms of taxes related to goods and services generally used by all the activities, VAT is deducted within the limits of the part
attributable to the year the activity refers to; to this end the cost of deductible VAT has been calculated by determining specific
breakdown criteria.
During the previous year the “other operating costs” item recorded total costs of 937 thousand euro due to effect of the merger.
pag
72
11. DEPRECIATION AND AMORTIZATION
Depreciation and amortisation total 38,060 thousand euro (31,165 thousand euro for the same period in 2006) with an increase
of 6,238 thousand euro mainly due to the amortisation of the concessions for the acceptance of horse racing and sports bets,
acquired in March 2006 and horse racing and sports licences from the Bersani call for tenders which were activated in 2007.
For greater details related to depreciation and amortisation see the notes on property, plant and equipment and intangible assets
no. 14 and no. 15.
During the previous year the “depreciation and amortisation” item recorded total costs of 1,389 thousand euro due to effect of
the merger.
12. FINANCIAL INCOME AND CHARGES
The net financial charges totalled 37,550 thousand euro (28,543 thousand euro), with an increase of 9,007 thousand euro and
is composed as follows:
thousands of euro
Revenue from Equity Investments:
MacHorse dividends
Immobiliare Valcarenga dividends
Alfea dividends
Revaluation of Alfea equity investment
Charges from Equity Investments:
Accrual to provision for Capannelle equity investment write-down provision
Other financial income:
Interest income on Securities
Income from security trading
Income from exchange rate differences
Interest income from banks
Interest income from subsidiaries
Interest income from SNAI Servizi S.r.l.
Interest income from group companies
Interest income on security deposits
Interest income on payment extensions
Other interest income
Other financial income
Financial Charges
Interest expenses on consolidation
Interest expense on Junior and Senior loans
Financial charges on Vendor Loan
Financial charges on determined payables
Interest expenses on loans
Interest expenses on bank c/a
Interest expense due to subsidiaries
Interest expense due to other group companies
Fees due to SNAI Servizi for sureties
Other interest expense
Interest expenses on leases
Interest increase from instalment payments
Financial charges on termination benefit discounting
Interest on arrears
Expense from exchange rate differences
Loss on security trading
Expenses for sureties
Other financial charges
Bank charges
Total Financial Income and Charges
-
pag
2007
2006
266
140
34
92
-
288
115
27
146
-
350
350
-
4,731
7
5
2,941
384
319
336
1
434
43
261
1,817
5
16
14
414
233
186
100
1
561
287
-
42,547
34,035
1,522
1,349
75
100
108
11
437
21
76
7
5
17
4,392
211
181
30,298
420
23,362
2,853
1,366
426
111
278
76
85
194
5
4
8
786
324
37,550
73
-
28,543
change
-
22
25
7
92
146
-
350
350
2,914
5
9
9
2.527
151
133
236
127
244
261
-
-
12,249
420
10.673
1.331
17
75
326
3
278
76
74
243
16
76
3
3
17
3.606
211
143
-
-
-
9,007
Financial charges include:
•
•
charges calculated at amortised cost required by IAS 39 by applying the effective interest method for loans opened for
acquisition of “Concession” company branches (for greater details on the loans see note 27) for a total of 34,035 thousand
euro of which 3,841 thousand euro recognised as accessory costs;
the interest calculated on the extension of payables due from BAP for the acquisition of company branches due to the discounting
of the payable established contractually without explicit interest (1,522 euro);
•
implicit interest calculated to discount the medium-long term determined payables due to AAMS, granted at the time of acquisition
of the Concessions (1,349 thousand euros);
•
interest expense due to the subsidiaries mature on inter-group current accounts, due to Festa S.r.l. for 60 thousand euro,
Immobiliare Valcarenga S.r.l. for 12 thousand euro, Mac Horse S.r.l. for 33 thousand euro and Trenno S.r.l. for 3 thousand
euro;
•
fees on sureties also include costs incurred for participation in the Superenalotto call for tenders for 1,098 thousand euro, as
well as fees on existing sureties.
The other financial income shows:
•
interest income matured on bank c/a for 2,941 thousand euro;
•
interest income due from the subsidiaries matured on inter-group current accounts, due from Festa S.r.l. for 84 thousand euro,
Risto Misto S.r.l. for 82 thousand euro, Teseo S.r.l. in liquidation for 151 thousand euro, Trenno S.r.l. for 64 thousand euro
and Televisione in liquidation for 3 thousand euro;
For additional details related to existing entries with group companies, see note 30 “Related Parties”
13. INCOME TAXES
Income taxes are broken down as follows:
thousands of euro
2007
2006
change
Irap
Ires (corporate tax)
2,389
1,924
465
2,796
96
5,791
2,793
2,796
96
2,998
- 8,023
- 13,704
5,370
300
- 7,660
4,567
Taxes related to previous years
Deferred tax liabilities
Prepaid taxes
Use of provision for deferred taxes
Use of prepaid tax assets
Total- 5,285
1,324
pag
74
-
6,609
-
7,723
6,044
803
The table shown below contains a reconciliation between the carrying amount for IRES and IRAP from the financial statements and
the theoretical amount (in thousands of euro):
31.12.2007
544
33%
180
4,25%
1.278
1.458
6.991
-5.991
3.777
419
-2.579
2.617
Pre-tax earnings
Theoretical IRES tax
Theoretical IRAP tax
Total theoretical taxes
temp diff deduc subs year
temp diff taxed subs year
balance temp diff for prev years
permanent differences
fiscal losses
irap
permanent differences (including employees)
prepaid tax effect on temporary differences taxed subs years
deferred tax effect on temporary differences deduc subs years
effect for use of temporary differences for previous years
taxes previous years
Effective taxes due
-972%
662
-800
513
735
1.110
-8.023
5.791
-8.334
96
-5.285
31.12.2006
-667
33%
-220
4,25%
1.030
2.053
220
894
-300
2.793
-3.093
-198%
1.324
For additional details on the effects from the tax charge and the fiscal consolidation see what is specified in detail in note 17
“Prepaid and deferred taxes” in these explanatory notes.
There are no disputes or assessments with the tax administration for the purposes of VAT and direct taxes which could give rise to
additional tax liabilities.
The year 2002 has been settled for the purposes of direct and indirect taxes.
For the acquisition of the Montecatini horse racing track and registration of the mortgage to guarantee the loan contract, three
payment notices were immediately contested and notified to SNAI S.p.A. by the local Tax Authority – Provincial Office of Pistoia
– Pescia Section – for a total of 2,610 thousand euro on the basis of the autonomy of the acts drafted and authenticated by the
drafter notary who had previously requested and obtained registration including at the Territorial Agency – Real Estate Publication
Service of Milan, where it was acquitted for the entire proportional tax. Meanwhile, despite the unfavourable ruling to the company
in the primary jurisdiction, after hearing the tax consultants, the Board of Directors is assessing the possible liability.
pag
75
EXPLANATORY NOTES TO THE MAIN ITEMS OF THE BALANCE SHEET
The comparison of values, always expressed in thousands of euro, except in individual cases where otherwise indicated, is performed
with the corresponding balances at 31 December 2006.
14. PROPERTY, PLANT AND EQUIPMENT
The amount of property, plant and equipment at 31.12.2007 totalled 136,563 thousand euro (117,074 thousand euro), changes
for the year are summarised in the attached statement:
Property, plant and equipment
values in euro
Land and
Buildings
Plant and
machinery
Cost
Balances at 1 January 2006
52.912.449
25.299.163
Acquisitions following business combinations 70.743.187 12.752.018
Reclassifications
24.765
Other increases
130.913
1.535.987
Decreases
-1.279.188
Balance at 31 December 2006
123.786.549
38.332.745
Balance at 1 January 2005
123.786.549
38.332.745
Acquisitions following business combinations
Reclassifications
196.542
Other increases
586.784
21.543.638
Decreases
-15.811
124.373.333
60.057.114
Amortisation and impairment
8.174.482
Acquisitions following business combinations3.003.312
Amortisation for year
2.534.689
Impairment
Disposals
Reclassifications
13.712.483
2.539.857
Impairment
Disposals
Reclassifications
Carrying amounts
At 1 January 2006
At 31 December 2006
At 31 December 2007
20.362.647
10.314.060
3.235.783
Other assets
Construction
contracts
and advances
Total
2.373.741
24.505
-260
174.825
-33.104
2.515.202
2.515.202
-24.505
942.500
80.609.858
83.495.205
0
2.784.225
-1.312.292
165.576.996
165.576.996
0
196.542
26.768.157
-958.311
191.583.384
942.500
942.500
4.637.735
7.152.937
2.087.345
-942.500
-
-
100.988
-1.279.188
13
32.633.315
-31.485
2.156.848
3.562.702
256.028
0
-12.136
171.195
30.624.474
13.317.372
5.871.460
0
-1.279.188
-31.472
48.502.646
0
6.358.587
0
-12.136
171.195
16.252.340
36.355.076
2.412.876
0
55.020.292
44.737.967
110.074.066
108.120.993
4.936.516
5.699.430
23.702.038
286.396
358.354
4.740.061
24.505
942.500
-
49.985.384
117.074.350
136.563.092
pag
76
The values expressed in the table include assets under finance leases including the property in Porcari, leased from the company
Ing Lease Italia S.p.A., for a historic cost of 3,500 thousand euro, of which 382 euro related to the land, and accumulated
depreciation of 328 thousand euro.
The payments for finance leases are shown in the table below:
thousands of euro
Total commitment at 31/12/07
of which
Payments due within 12 months
Payments due from 1 to 5 years
Payments beyond 5 years
Redemption
34.138
6.736
26.480
922
713
The commitments for lease payments refer to the following contracts:
•
•
•
•
Finance lease contracts signed with the company Ing Lease Italia S.p.A. related to the acquisition of the building located in
Porcari (LU) with expiration in June 2016.
Contract for the lease of technology for the new points of sales and shops for 4,155 thousand euro (lease-back) signed in
December 2006 with expiration in December 2011. At the end of the contract three options are possible: return of the
machines, extension of the lease and purchase of the machines. The extension of the lease is planned for additional one year
periods upon request of the company. In the event of purchase of the machines, the company must send a written request and
ask for a bid.
Lease contract for technology and furniture for the new points of sales and shops for 4,389 thousand euro (lease-back) signed
in September 2007 with expiration in September 2012. At the end of the contract three options are possible: return of the
ask for a bid.
Two contracts signed at the end of the month of December 2007 with expiration in December 2012 for lease of technology
for the new points of sale and shops for 23,496 thousand euro (lease-back). Both contracts have a purchase option for the
machines by a third party buyer; in the event of failure to sell by the expiration for any reason, there is an automatic renewal
for an additional twelve month period.
The company owned plant and machinery include the electrical, water, fire-fighting and air conditioning systems - as well as work
to bring them up to standard. Electronic machines, amusement machines (slot machines), the “pda” point of acces used for their
online connection, as well as machines for normal activity. Increases for the period totalling 21,545 mainly refer to:
•
•
•
•
technology installed on loan in the new point opened following awarding of the so-called Bersani call for tenders (3,467
thousand euro);
internally generated technology, on particular Betsi terminals, installed on loan in the new points (Bersani licences) and in sports
agencies following updating of the sports gaming protocol starting in April 2007 (2,626 thousand euro):
a cost totalling 716 thousand euro for the creation of a MV/LV transformer room at the Porcari site;
the value of capitalised assets related to lease-back transactions for a total of 13,797 thousand euro.
The increases in other assets for 4,638 thousand euro mainly refer to purchases of furniture delivered on loan in the new shops
and corners (Bersani licences).
Financial charges were not capitalised in property, plant and equipment.
pag
77
15. INTANGIBLE ASSETS
The amount of property, plant and equipment at 31.12.2007 totalled 460,911 thousand euro (376,158 thousand euro), changes
for the year are shown in the following table:
values in euro
Goodwill
Concessions,
license, trademarks
and similar rights
Cost
34,295,091
Acquisitions following
business combinations
213,750,694
Reclassifications
222,942
Other increases
Decreases
Balance at 31 December 2006 248,268,727
Reclassifications
Other increases
Decreases
23,158,384
23,825,869
Impairment
0
Disposals
Reclassifications
30,980,526
Impairment
Disposals
Reclassifications
Carrying amounts
At 1 January 2006
At 31 December 2006
At 31 December 2007
11,136,707
225,110,343
225,110,343
Development
costs
Industrial
patent rights
and licences to
use original works
Current
assets
Others
Total
1,535,764
10,195,268
4,270,113
52,258,657
-222,942
0
163,724
-139,395
4,071,500
804,472
-139,395
439,576,428
79,946,235
434,776
116,455,506
79,946,235
4,506,276
556,031,934
3,208,248
38,638,548
1,962,421
172,902,000
386,652,694
174,864,421
530,827
109,921
2,066,591
10,305,189
-
34,553,492
1,385,319
209,417,913
3,451,910
0
135,684
0
10,440,873
1,903,434
614,174
9,754,308
278,919
353,761
0
25,729,303
893,093
398,871
77,823
0
0
10,108,069
321,683
24,780,232
0
3,529,931
244,539
31,701,759
63,418,780
0
56,709,829
1,291,964
10,185,892
0
3,774,470
0
0
0
95,120,539
58,987
149,135,118
152,708,084
921,590
1,173,498
2,159,946
440,960
197,120
254,981
79,946,235
1,061,865
541,569
731,806
13,620,109
376,157,648
460,911,395
pag
78
Investments for the year totalling 116,456 thousand euro, are mainly composed of:
• 79,946 thousand euro entered in current assets, of which 79.905 thousand euro paid to AAMS for licences which are not
yet operative. The total amount paid to AAMS for awarding of 1,206 sports licences (342 shops and 864 corners) and 3,886
horse racing licences (99 shops and 3,787 corners), under one sports concession and one horse racing concession respectively,
as well as the awarding of a concession for remote horse race gaming and one for sports, following the participation in the
call for tenders called by the Ministry of the Economy and Finance to apply the Bersani decree, totals 113,944 thousand
euro;
• 34,553 thousand euro entered in the “concessions, licences, trademarks and similar” of which 34,039 thousand euro related
to the value paid for the new licences which have started bet acceptance activities, mainly due to the effect of airing the new
horse racing or sports licences with the old only horse racing or only sports concessions active in already operative BAP.
• 1,385 thousand euro for the development of Betsi 2006, Videa, corner furnishing prototypes and for upgrading of gaming
software to the new sports bet acceptance protocol, established by AAMS which became effective as of 2 April 2007, as
well as the odds display systems;
• 572 thousand euro for investment to upgrade corporate software.
The item concessions includes what is related to the acquisition of 450 horse racing and sports concession company branches,
the effects of which started 16 March 2007 and the portion of the payment related to the new sports and horse racing licences
which are already active (as described above) that are amortised based on the duration of the concession.
Financial charges were not capitalised in intangible assets.
The goodwill existing at 1 January 2006 totalling 11,137 thousand euro refers to the goodwill net amortisation, from SNAI Servizi
Spazio Gioco S.r.l., merged with SNAI S.p.A. in 2002 (10,769 thousand euro), related to the betting segment as well as the
merger deficit following the merger of the subsidiary SNAI Servizi Spazio Gioco S.r.l. for 368 thousand euro related to the betting
segment.
As mentioned above, the company decided not to apply IFRS 3 – business combinations – retrospectively to combination transactions
occurring before transition to the IFRS. Consequently, the goodwill from SNAI Servizi Spazio Gioco S.r.l., was entered during the
transition to the IFRS, at the net carrying amount determined according to the previous applied accounting standards (Italian
accounting standards).
This goodwill, which was completely allocated to the Cash Generating Unit (“CGU” “computerised activity – services” (Services
Division, as required by IAS 36 was subject to an impairment test at 31 December 2007. In particular, in compliance with the
above standard, the recoverable value of goodwill was estimated based on a measurement method founded on prospective cash
flows, assumed from the 2008-2012 industrial plan approved by the Board of Directors, by applying an average weighted cost
of capital (gross WAAC), totalling 7.58%.
The WACC, resulting from the use of a risk free sample totalling 4.40%, a beta unlevered totalling 0.81 and an equity risk premium
(ERP) of 5%. The nominal cost of shareholding capital totals 8.5%.
The cost of third party capital, totalling 6%, taking into account a risk-free investment yield rate totalling 4.40%, of a levered debit
premium of 1.60%. The financial structure deemed sustainable (at full-steam) in determining the discount rate. The estimate of future
cash flows is in line with past results and the competitive and regulator y scenario for the segment.
The recoverable value of goodwill estimated in this manner is higher than its total carrying amount, totalling 11,137 thousand euro.
Moreover, external and internal information sources provide indications to not reduce the value.
The changes during the period or in the near future in the technological, economic, legal or market context where the company
operates or the market is business is geared to, can only be favourable. Evidence of obsolescence or deterioration of the material
connected to the cash generating unit are not present and will be made up by the normal and ordinary deficits according to the
ordinary operation plans present in the company. Thus it is not possible to forecast anything but favourable variations of the
measurement and way of using all of the assets comprising the generating unit.
With reference to the acquisition of concession company branches finalised on 3 April 2006 and with effects as of 16 March
2006, SNAI S.p.A. applied IFRS 3 (“Business Combinations”). SNAI S.p.A. acquired 450 company branches in 2006, operating
in 218 sports concessions and 232 horse racing concessions. With reference to each agency SNAI acquired the company branch
strictly involving the concession ownership.
Based on IFRS 3 (“Business Combinations”) the Concessions have been recognised in intangible assets at their fair value. The value
of the Concessions, identified when the paid price was allocated, is amortised on a straight-line basis until their original expiration.
As required by IAS paragraphs 11 and 12, goodwill resulting from the concession company branch acquisition transaction was
subject to an impairment test at 31 December 2007.
During 2008 an additional 8 company branches were acquired resulting in direct management of another 5 sports concessions
pag
79
Following the call for tenders to award licences for the opening of new points of sale, in compliance with the provision converting
legislative decree no. 223 of 4 July 2006 into law, SNAI was awarded the concessions for bet collection. In particular a sports
concession with payment of acquired licences for euro 67.8 million (342 sports shops and 864 corners) and a horse racing
concession with payment of acquired licences for euro 45.6 million (99 horse racing shops and 3,787 corners). In addition it
was awarded the concession for remote horse racing gaming with the payment of acquired licences for euro 0.3 million and the
concession for remote sports racing gaming with the payment of acquired licences for euro 0.3 million. Therefore, SNAI was the
operator who obtained the greatest number of awards among all the participants.
Moreover, on 17 November 2007, a right was acquired for a sports concession (shop) for euro 123 thousand.
These new licences will be added to the sports and horse racing concessions acquired by SNAI in March 2006 operative in the
current sales shops, thus allowing the company to maintain its leadership in the betting segment, both in terms of number of points
of sale and collected volumes.
Within the new points, whose opening is scheduled to be completed by the end of spring 2008, SNAI conducts a bet collection
and acceptance business using the structure, know-how and professionalism already using in the operative company branches
acquired in March 2006. The performance of the activities shows a coordination and results significantly higher due to the effect
of the central management and thus minimisation of the risk connected with geographic diversification of operation, collection and
acceptance of bets. Thus all of the points of sale will be managed in the same manner. The activity connected with the amusement
machines located in the points of sale shall take advantage of the territorial positioning of the concessions as well.
The acceptance policies are centrally handled in order to minimise the risk connected with geographical diversification of bet
collection and acceptance. Moreover, due to the effect of management centrally handled by SNAI the direct and indirect benefits
resulting from the acquired concessions and those resulting from the awarded licences, give reason to believe that no point of sale
generates revenue separate from the other points of sale.
Based on application of IAS 36 – paragraph 81 the lowest level inside the entity has been identified where goodwill can be
allocated and coinciding with the combination of the cash generating unit with reference to the entire Concessions Division. This
was also following the consideration that company management controls operations of the collection activity in the Division in
question and makes decisions based on the activities as a single entity and single product line.
In the case in hand, the recoverable value of goodwill, as well as intangible assets not yet available for use, was estimated based
on a measurement method founded on prospective cash flows, assumed from the 2008-2012 industrial plan approved by the
Board of Directors, by applying an average weighted cost of capital (gross WAAC), totalling 8.64%.
The recoverable value needs to be adjusted by the discounting of the possible sales price of the cash generating unit (points of
sale) taken individually and as a whole (terminal value).
Thus it was necessary to add to the discount calculation the possible transfer price of the reference target entity (cash generating
units) identified in the continual cash flow yield attributed to the last forecast year. As test method, the hypothesis was considered
of measuring the terminal value by extracting projections based on the Industrial Plan using a stable growth rate for the years after
2012 and an abatement percentage connected to the probability of concession and/or right renewal. It is important to note that
the percentages used are extremely precautionary.
As for the impairment test discussed above, in terms of the goodwill allocated to the “CGU” “computerised activity – services”,
the discounting rate resulting from the use of a risk free sample totalling 4.40%, a beta unlevered totalling 0.81 and an equity
risk premium (ERP) of 5%. The nominal cost of shareholding capital totals 8.5%.
The cost of third party capital, instead, with reference to the discussed “CGU” totals 9%, taking into account a risk-free investment
yield rate totalling 4.40%, and a levered debit premium of 4.60%.
The financial structure deemed sustainable (and at full-steam) in determining the discount rate.
The recoverable value of goodwill estimated in this manner, as well as intangible assets not yet available for use, is higher than
its total carrying amount.
Moreover, the estimate of future cash flows is in line with the competitive and regulatory scenario for the segment.
operates or the market is business is geared to, are estimated to be favourable.
Evidence of obsolescence or deterioration of the material connected to the cash generating unit are not present and will be made
up by the normal and ordinary deficits according to the ordinary operation plans present in the company.
Thus it is not possible to forecast anything but favourable variations of the measurement and way of using all of the assets comprising
the generating unit.
Lastly, external and internal information sources provide indications to not reduce the value.
pag
80
16. EQUITY INVESTMENTS
The company holds equity investments in the companies as specified in the attachments 2, 2.1 and 2.2 to these explanatory notes.
For the information requested by DEM communication 6064293 of 28 July 2006 see attachment 1 to the consolidated financial
statements presented at the same time as these notes.
On 10 March 2006, SNAI S.p.A. for a financing transaction to acquire concession company branches, participated in the
establishment of a new Luxembourg company called Solar S.A. by subscribing and paying in 30% of the share capital the entire
amount of which totals 31 thousand euro. Solar S.A., controlled by FCCD Limited, an Irish company which is not part of the scope
of consolidation of Gruppo SNAI and its directors are the majority shareholder, obtained the financial resources necessary for
payment of a Junior Loan through issue of premium shares subscribed by third parties. The characteristics of the Junior loan are
determined within the context of the total structuring of the loan (paragraph 23).
Following the merger of Ippodromi San Siro the following equity investments were acquired.
- Trenno S.r.l. Unipersonale (formerly Sport e Spettacolo Ippico) acquired at the cost value of 1,932 thousand euro established
on 27 July 2006 and to which Ippodromi San Siro conferred the “horse racing management” company branch effective 19.09.2006;
- Alfea S.p.A. Soc. Pisana Corse Cavalli entered for 1,331 thousand euro;
- Società Gestione Capannelle S.p.A acquired at a value of 350 thousand euro and completely written down at 31.12.2006.
The table below shows the values of the assets, shareholders’ equity, liabilities, income and profit or loss related to the associates
at the highest value: For Alfea S.p.A. the data are from the draft financial statements for 2007.
Assets
7,966
Other Liabilities
Total Liabilities and SE
5,154
2,812
7,966
Revenue
Profit on year
5,138
531
On 5 June 2007 the extraordinary shareholders’ meeting of the Società Gestione Capannelle S.p.A. shareholders of vote to cover
the losses to 31 March 2007 which totalled 1,932,710.00 euro by:
• zeroing out the share capital totalling 1,890,000.00 euro;
• use of the legal reserve for 12,048.00 euro;
• use of the extraordinary reserve for 27,066.00 euro;
• payment by shareholders in propor tion the shares possessed by each one for 2,796.00 euro;
In addition, the shareholders’ meeting also voted:
• to reconstitute share capital to 1,956,000.00 euro;
• to reconstitute the extraordinary reserve to 41,204.00 euro;
• that the shareholders who could have exercised the option right by 20 July 2007 and by 5 August the subscribers would have
had to exercise the pre-emption right on any uncalled shares; to consider effected the increase ins hare capital up to the amount
hat will have been subscribed at that date and to hereby modify article 5 of the articles of association regarding share capital;
• that the part of share capital exceeding the payment at the time of subscribing the share capital of 2.5/10 should be paid
by the shareholders: 35% by 31 October 2007 and 40% by 15 December 2007 – as promptly performed.
On 19 July 2007 SNAI S.p.A. subscribed 1,713,478 shares at 0.3 euro with simultaneous payment of 2.5/10 of the sum totalling
128,510.85 euro and 11,563.2 to cover the losses. Moreover, subsequently SNAI S.p.A. subscribed and paid its uncalled portion
totalling 2,090.23. Therefore the equity investment of SNAI S.p.A. in Società Gestione Capannelle S.p.A. now totals 26.67%.
On 28 June 2007 the shareholders’ meeting of the subsidiary La Televisione S.r.l. in liquidation was held which approved the final
liquidation financial statements prepared at 28 June 2007 and on 23 July 2007 the company was stricken from the business
registry.
SNAI programmed the sale of 10% of the equity investment in Connext S.r.l. therefore the remaining 15% totalling 46 thousand
euro was reclassified in other companies and the 10% was classified in available-for-sale assets and measured at cost, since it
was less than the estimated sales price (fair value).
All of the equity investments held are measured at cost; in the provision for adjustment of equity investments was accrued the amounts
proportional to the percentages of possession of losses from 2001 to 2006; if the percentage of loss for the year exceeds the
entry value of the equity investment adequate accrual to the provision for risks is made.
pag
81
17. PREPAID TAX ASSETS AND DEFERRED TAX LIABILITIES
These reflect the balance sheet rectification due to temporary differences; the total amount is described in the tables below, together
with the related theoretical amount for prepaid and deferred taxes as well as amounts recorded in the accounts.
Prepaid tax assets
Temporary differences
Taxed bad debt provision
Provision for risks
Provision for warehouse write-down
Difference between balance sheet
value and tax value of property, plant
and equipment and intangible assets
Supplementary charges on
share capital increase
Other temporary differences
Total
Amount
8,711
7,312
3,371
Rate
27.50%
27.50%
31.40%
Tax effect
2,396
2,011
1,058
16,842
31.40%
5,288
7,821
31.40%
1,143 31.40% - 27.5%
45,200
2,456
370
13,579
Prepayments entered
2,396
2,011
1,058
Reversal period
2008 and subsequent
2008 and subsequent
2008 and subsequent
5,288
2008 and subsequent
2,456
370
13,579
2008 and subsequent
2008 and subsequent
The directors of SNAI S.p.A. decided to record the prepaid taxes generated for all temporary differences between the balance
sheet values and tax values of the related assets/liabilities based on forecasts of positive results for the current year and future ones.
The increase in prepaid taxes of 3,302 thousand euro, compared to 31 December 2006, is due to the combined effect of
recognition of prepaid taxes and reversal of prepaid taxes generated in previous periods. This decrease was also influences by
the reduction in the rate required by Law 24 no. 244 of December 2007 which entailed a reduction of the IRES rates (from 33%
to 27.5%) and IRAP (4.25% to 3.9%).
For the three year 2006-2008 period the company, as consolidating company opted for the national tax consolidation as per
articles 117 et seqq. Presidential Decree 917/1988; as consolidated companies Trenno S.p.A. (later merged), Festa S.r.l., Mac
Horse S.r.l. and Immobiliare Valcarenga S.r.l. opted to take part in this option. As of the 2007 tax period Trenno S.r.l. was added
to the fiscal consolidation.
The adoption of the fiscal consolidation may entail some beneficial effects on the Group’s tax charge, including:
•
•
•
the immediate use, with total or partial, of period tax losses of the companies taking part in the consolidation decreasing the
income possessed by the other consolidated companies;
exclusion from taxes of dividends distributed between the companies participating in the consolidation of the same year;
the possibility, according to certain conditions to transfer assets, other than productive ones of revenue or exempt capital gains,
in a continuous regime of fiscal values between companies which have exercised the group taxation option.
In the accounting situation under discussion the company, due to the effect of taxable incomes or transmitted losses, recognised a
receivable due from the consolidated companies for a total of 5011 thousand euro of which 77 thousand euro from Mac Horse
s.r.l., 25 thousand euro from Immobiliare Valcarenga S.r.l. and 399 thousand euro from Trenno S.r.l.; SNAI S.p.A., as consolidating
company is requires to pay the balance and advance of IRES due based on the consolidated income tax return.
Based on existing agreements the excess previous tax carried forward or resulting from income tax returns filed by the companies
which opted for the consolidates can be used by the parent company only upon specific request.
The transfer of money for the payment of taxes on taxable income transferred to the consolidating company is regulated by intergroup current account with debiting on the payment deadline date for the aforesaid taxes.
For the time being payment of sums between the companies which exercised the option for any received or attributed tax advantages
is not required.
Moreover, since the consolidated companies are companies subject to the management and coordination of the consolidating
company, the advantages (or disadvantages) resulting from certain consolidation adjustments are attributed to the consolidating
companies.
The tax liability of the consolidated companies to the tax authority remains unchanged in the event that a higher taxable income is
assessed for the parent company for errors in the taxable income communicated by the subsidiaries.
Lastly, SNAI S.p.A. as consolidating company and Trenno S.p.A. (now merged with the consolidating company) have opted for
a neutrality system for inter-group transfers in accordance with article 123 of the Tax Act related to the transfer from Trenno to SNAI
of the Milan San Siro trot race track and the Montecatini Terme trot race track which took place in March 2006.
Consequently, due to the effect of this option the Group benefited from the “sterilisation” of the fiscal capital gain caused by this
transfer totalling around 32 million euro. Naturally this neutrality scheme shall be terminated if there is a later transfer not in a
neutrality scheme or in the event of interruption or failure to renew the national consolidation scheme.
pag
82
Provision for deferred taxes
Amount
Rate
Tax effect
Deferred
Tax amortisation of goodwill
(8,687)
Tax amortisation of company branch goodwill
(21,077)
Difference between balance sheet value and fiscal
value of determined payables due to AAMS and
payables due to BAP for concession acquisition
(7,366)
Difference between balance sheet value and
tax value of concessions
(57,453)
tax value of property, plant and equipment
(42,187)
(305)
(1,451)
Total deferred taxes
(138,526)
31.4%
31.4%
(2,728)
(6,618)
(2,728)
(6,618)
27.5%
(2,026)
(2,026)
31.4%
(18,040)
(18,040)
31.4%
27.50%
31.4% - 27.5%
(13,247)
(84)
(449)
(43,192)
(13,247)
(84)
(449)
(43,192)
The directors of SNAI S.p.A. decided to record the deferred taxes generated for all temporary differences between the balance
sheet values and tax values of the related assets/liabilities. In particular, the acquired company branches, as business combinations
are accounted for by applying the IFRS 3 acquisition method.
Therefore, the company recognised assets and liabilities identifiable in the acquisition at related fair values at the acquisition date
and thus recognised goodwill only after having allocated the acquisition cost as described above.
The value of concession licences entered in the balance sheet differs from the cost cited in the contract: the statutory balance sheet
amortisation differs from the tax amortisation as per article 103, paragraph 2, Presidential Decree 917/1986 from which the
deferred taxes. The goodwill value is not amortised by annually subject to impairment testing: tax amortisation is disciplined by
article 103, paragraph 3, Presidential Decree 917/1986 from which the deferred taxes.
The decrease in the provision for deferred taxes of 8,015 thousand euro, compared to 31 December 2006, in addition to the
combined effect of recognition of deferred taxes and reversal of deferred taxes generated in previous periods, is mainly due to
the reduction of the rate under Law 24 no. 244 of 24 December 2007 which entailed a reduction in IRES (from 33% to 27.5%)
and IRAP (from 4.25% to 3.9%) rates.
18. INVENTORIES
At 31 December 2007 inventories totalled 14,018 thousand euro and are broken down as follows:
thousands of euro
31.12.2007
31.12.2006
change
1,159
504
12,355
14,018
5,755
5,399
3,053
14,207
-4,596
-4,895
9,302
-189
Raw material
Construction contracts.
Finished products and goods
Total
Finished products/goods include inventories for spare parts for 27 thousand euro (81 thousand euro). The variation in raw materials
is attributable to the use of materials for the production of new gaming terminals (PUNTO SNAI WEB SMALL, LARGE, BiBest and
BETSI 2006); the increase in finished products is attributable to the produced terminals and acquisitions, effected during the year,
machines for setting up new points (shops and corners both in direct management and customer licensees).
The goods for setting up the new points of sale will be sold or delivered on loan based on the selection of the managers of the
new points: if the loan is selected the consequent decrease in inventories will generate an increase in property, plant and equipment
for the same amount under plant and machinery.
The value of inventories is recorded net of the provision for warehouse write-down which totals 3,199 thousand euro (3,532
thousand euro).
The table below shows the movement in the provision for inventory write-down:
thousands of euro
Raw material
Construction contracts
Finished products/Goods
Total
31.12.2006
Accrual
Uses
709
265
2,558
3,532
0
-13
-10
-138
-161
pag
83
Reclassification
31.12.2007
-172
-172
696
255
2,248
3,199
19. ACCOUNTS RECEIVABLE
Accounts receivable at 31 December 2007 totalled 51,355 thousand euro (48,697 thousand euro) and are broken down as
follows:
31.12.2007
thousands of euro
Current accounts receivable
due from customers
Direct debit due from Slot customers
Notes to collect
due from subsidiaries
due from SNAI Servizi S.r.l.
due from sister companies
bad debt provision
-
Total
31.12.2006
38,190
9,921
6,827
2,241
25
5,849
44,545
851
6,688
797
6
7
4,197
-
51,355
change
-
-
48,697
6,355
9,070
139
1,444
6
18
1,652
2,658
Accounts receivable due from customers include, among others, receivables due from managers for amusement machines (Slot
machines) for 20,050 thousand euro (33,383 thousand euro at 31.12.2006). Receivables for presentation of Rid on sight from
Slot customers total 9,921 thousand euro (851 thousand euro). Receivables due from customers and Rid include the balances of
Slot gaming at 31 December net of compensations recognised for the manager (third party assigned with collection) and operator,
which mature on a fifteen day basis with “immediate” due date; they also include withholding balances due to AAMS – Amministrazione
Autonoma Monopoli di Stato and calculated at 12% of the gaming movement on amusement machines.
Receivables due from subsidiaries show a receivable entered due Trenno S.r.l. and related to grants for the so-called customisations
of the metropolitan Horse Race Tracks accrued by the merged company Ippodromi San Siro S.p.A. (formerly Trenno S.p.A.) for
the years from 2005 until the date of 19 September 2006, date the Ippodromi San Siro “Horse Race Track management” company
branch was conferred to the Trenno S.r.l. company for a total of 1,643 thousand euro;
The bad debt provision was determined considered the amount of doubtful receivables. The directors believe the provision is suitable
for facing estimated losses on future receivables. Accounts receivable include notes to collect for 6,827 thousand euro (6,688
thousand euro) recorded net of interest charge on future due dates and previously received from slot customers following the definition
of instalment payments agreed upon following credit collection actions.
The table below shows the movements in the bad debt provision:
thousands of euro
At 01.01.06
Accrual for year
Reclassifications
From trenno merger
Use of provision
individually
collectively
1,712
703
195
-342
2,074
202
-347
3,641
At 31 December 2006
Accrual for year
Reclassifications
Use of provision
Reverse of unused amounts
Adjustment to discount rate
At 31 December 2007
2,415
195
1,732
202
-347
4,197
556
1,060
400
-12
233
-29
1,293
400
-41
5,088
761
5,849
As 31 December 2007 the analysis of accounts receivable due but not written-down was as follows:
Due but not written down
0 - 90
90 - 120
days
days
Total
Not due-highrated
Total 2007
51.355
33.641
2.397
2.968
12.349
Total 2006
48.697
22.883
6.748
14.995
4.071
In thousands of euro
pag
84
> 120
days
20. OTHER ASSETS
Noncurrent assets, classified as other non-financial assets are composed as follows:
thousands of euro
Other non-current assets
Tax Assets:
for refunds
for disputed taxes
for equity taxes
31.12.2007
Other receivables:
notes receivable in portfolio
receivable security deposits
Tivù+ in liquidation
Total other non-current assets
31.12.2006
62
73
54
189
72
73
54
199
1,792
99
1,891
2,080
1,303
92
371
1,766
1,965
change
-
-
-
10
10
489
7
371
125
115
Notes receivable totalling 1,792 thousand euro (1,303 thousand euro) are the notes due beyond the year received from customers
for the definition of established repayment plans and entered at current value.
Other current assets consist of:
thousands of euro
31.12.2007
31.12.2006
change
794
2,022
188
29
46
3,079
112
1,205
253
79
1,649
682
817
188
224
33
1,430
501
103
398
715
130
8,940
3,081
2,625
3,571
1,574
902
79
705
1,094
24
339
1,518
360
50
2,984
22,723
478
3,723
1,284
16
1,466
264
369
1,069
1
4
416
1,518
360
50
3,384
7,634
237
130
8,940
642
1,341
3,555
108
638
290
705
25
1
20
77
400
15,089
Other current assets
Tax Assets:
interest income on withholdings
IRAP prepayment
IRES prepayment
IRES credit
Other receivables due from tax authority
Accounts receivable due from subsidiaries
Accounts receivable due from others:
Slot Operators for withholdings (PREU)
AAMS 0.5 slot grant
Accounts receivable due from BAP
Rid due from BAP
Advance on AAMS concession fee
receivables on event outcome contests
receivables due from Circuito Gold Points of Sale
positions from AAMS for company branch acquisition
Rec. for surety expense reimbursement
other receivables
Social security institutions
Employees
receivables due from Tris Associated
receivables for sale of equity investments
receivables due from ”Linkage”
receivable security deposits
Bad debt provision due from others
-
Accrued income and prepaid expenses
Accrued income
Prepaid expenses
Total other current assets
pag
85
-
-
-
-
-
16
5,096
5,112
16
4,484
4,500
612
612
31,415
13,886
17,529
The table below shows the movement in the provision for bad debts due from others:
thousands of euro
Individually written down
As 01 January 2006
Accrual for year
Reclassifications
Use of provision
At 31 December 2006
Accrual for year
Reclassifications
Use of provision
At 31 December 2007
Individually written down
4,726
463
- 1,732
73
3,384
400
2,984
-
Total
4,726
463
- 1,732
73
3,384
400
2,984
The receivable due from AAMS for 8,940 thousand euro is related to the grant for recognising 0.5% on the gaming movement
generated by amusement machines paragraph 6 (Slot machines) which by law must be reversed from the AAMS concession fee
to the benefit of the network licensees as better described in note 3 “revenue from sales and ser vices”.
Receivables due from BAP for 3,081 thousand euro (3,723 thousand euro) in addition to Rid presented with at sight due date for
2,625 thousand euro are related to the management contract for collection of bets for acquired Concessions and contracts signed
with the managers of corners and shops for the activation of the new Bersani licences; these receivables mature on a daily basis
and are paid weekly, subtracting the bets collected at agencies, amounts of tickets paid and reimbursed, fee recognised to the
manager and the difference from withdrawals and deposits made via the Punto SNAI cash register on SNAICards from the net
movement.
The advance on concession fee item totalling 3,571 thousand euro contains the amount paid to AAMS in July as an advance on
the concession fee for the so-called Bersani licences and balanced in January 2008 with the payment of the first advance for the
subsequent year as required by the Convention.
Receivables for positions due from AAMS with a balance of 79 thousand euro (369 thousand euro), are the result of the different
between payables due to AAMS conferred with the Concession company branches, calculated net of the credit entries and the
greater deposits made following the requests of AAMS which had not taken into account the credit position of some Concessions
while waiting to acquire the documents supporting such positions.
The “due from subsidiaries” item totalling 501 thousand euro contains the receivable due from the subsidiaries which took part in
the fiscal consolidation as better described in note 17.
Prepaid expenses include:
- 3,312 thousand euro for advance payments for surety fees and insurance premiums, of which 2,347 thousand euro referred to
fees paid to UniCredit Banca Mobiliare S.p.A. for opening signatory credit expiring on 31 December 2016, aimed at the release
of the sureties, up to the maximum value of 140,000 thousand euro;
- 1,734 thousand euro related to maintenance, consultation and operating lease contracts.
21. FINANCIAL ASSETS
The table below shows the breakdown for financial assets:
thousands of euro
31.12.2007
Asset management account
15,238
Former Società Fiorentina Corse Cavalli shares for merger swap
1
Banca Popolare warrant
6
Financial current account income due from Servizi S.r.l.
13
Financial current account income due from subsidiaries
3,059
Financial current account income due from companies
subject to control by the same parent company
2,539
Provision for financial asset write-down
671
Total other current financial assets
20,185
pag
86
31.12.2006
change
1
16
5,637
15,238
10
13
- 2,578
1,344
641
6,357
1,195
30
13,828
-
Financial current account income due from subsidiaries is shown below:
thousands of euro
Teseo in liquidation
Festa S.r.l.
Ristomisto in liquidation
La Televisione in liquidation
31.12.2007
1,756
338
18
947
3,059
31.12.2006
1,478
1,845
1,432
760
122
5,637
-
change
278
1,507
1,414
187
122
2,578
The provision for write-downs is attributed to the receivable due from Ristomisto S.r.l. in liquidation for 639 thousand euro and from
Teseo S.r.l. in liquidation for 32 thousand euro.
Financial current account income due from companies subject to control by the same parent company are related to Tivu + S.p.A.
in liquidation for 1,665 thousand euro and Teleippica S.r.l. for 874 thousand euro.
The balances of financial current accounts include interest accruing in the period, calculated at the Euribor rate at three months
plus five percentage points.
The asset management account is composed of securities which can be immediately converted to cash.
22. CASH AND CASH EQUIVALENTS
The table below shows the breakdown of cash and cash equivalents:
thousands of euro
31.12.2007
31.12.2006
change
Bank current accounts
Cash on hand
89,231
1
253,696
4
Liquid assets
89,232
253,700
Net cash and cash equivalents as reported in the cash flow statements
0
89,232
0
253,700
- 164,465
3
- 164,468
- 164,468
23. SHAREHOLDERS' EQUITY
On 15 January 2007 the share capital increase was concluded voted on 14 September 2006 by the extraordinary shareholders’
meeting of SNAI S.p.A., which had given the Board of Directors the power to perform as per article 2443 of the Italian Civil Code,
separate increases in share capital up to a maximum of 100,000,000 new shares.
On 26 October 2006 the Board of Directors voted to ask for an increase which would make it possible to acquire financial
resources up to 250 million euro between nominal and share premium. On 30 November 2006, CONSOB, the National
Commission for Companies and the Stock Exchange, has issued its approval for publication of the information prospectus required
by article 5, second paragraph of the EC directive 71/2003 and article 24 of the EC regulation 809/2004 related to the offer
as an option to ordinary share shareholders of SNAI S.p.A. and the Board of Directors had voted to establish a maximum of
61,718,860 shares to issue in the context of the offering and to offer them under option to the shareholders at a unit price of 4.05
euro, including the nominal value, totalling 0.52 euro and share premium at 3.53 euro.
The new shares were offered as an option at a ratio of 28 shares for every 25 shares held. At the end of the subscription period
(4 – 21 December 2006) 54,581,100 share rights had been exercised at 61,130,832 ordinary shares of SNAI S.p.A., totalling
99.05% of the shares of the Offering for a value of 247,579,869.6 euro. A total of 27,927,750 of these rights, corresponding
to 31,279,080 ordinary shares, totalling 50.68% of the total number of shares of the offering, were exercised by the parent
company SNAI Servizi S.r.l. The uncalled shares totalling 525,025 were offered on the Stock Exchange by the company, as
required by article 2441 paragraph 3 of the Italian Civil Code, through UniCredit Banca Mobiliare S.p.A. from 8 to 12 January
2007.
The option rights were all sold and exercised through the subscription by the final deadline of 15 January 2007, for 588,028
newly issued shares for a value totalling 2,381,513.40. Thus the transaction was concluded on 15 January 2007 with the complete
subscription of the 61,718,860 shares offered for a total value of 249,961,383.00 euro. On 12 February 2007 the SNAI S.p.A.
share capital increase was filed with the Lucca Chamber of Commerce as document M07212L2120 for a nominal total of
60,748,992.20 euro, equal to a total of 116,824,985 ordinary shares with a nominal value of 0.52 euro each, upon completion
of the debiting of the amounts related to the subscriptions.
pag
87
The share capital at 31.12.2007 entirely subscribed and paid-up amounted to 60,748,992.20 euro (at 31 December 2006
60,443,321.04 euro) and is composed of 116,824,985 ordinary shares (116,236,957 ordinary shares at 31 December
2006).
nominal value in euro
116,824,985
116,824,985
0.52
The table below shows a reconciliation between the number of shares in circulation at the beginning the year and at the end of
the period.
Number of shares
number of shares at 01.01.2007
116,236,957
588,028
116,824,985
The issued shares are all ordinary shares without any constraints or preferences.
There is no treasury stock held directly by the parent company SNAI S.p.A. or through its subsidiaries or associates.
Reserves
The share premium reserve, totalling 211,319 thousand euro, was established with the share capital increase, as described above,
for 219,535 thousand euro minus the accessory charges net of the fiscal effect related to the increase in share capital for 8,216
thousand euro, as required by IAS 32. The increase for the period totalling 2,364 thousand euro is related to the conclusion to of
the share capital: 3,743 thousand euro of share premium minus accessory charges for 1,379 thousand euro.
At 31/12/2006, as a consequence of the merger of the subsidiary Ippodromi San Siro S.p.A. (formerly Società Trenno S.p.A.)
with SNAI S.p.A, retained earnings were reclassified for 2,750 thousand euro: 899 thousand euro to the reserve for revaluation
of asset revaluation as per Law 72 of 19/03/1983, 1,850 thousand euro to the reserve for asset revaluation as per Law 413
of 31/12/1991 and 1 thousand euro to the translation reserve.
The shareholders’ meeting to approve the financial statements held on 15 May 2007 voted to cover the losses for 2006 totalling
1,992 thousand euro entirely using the reserve as per Law 413 of 31/12/1991 (1,850 thousand euro) and for 142 thousand
euro the reserve as per Law 72 of 19/03/1983.
The extraordinary reserve decreased by 1,161 thousand euro due to the different classification method and consequent recording
of a lease contract singed in 2006.
24. TERMINATION BENEFITS
Termination benefits at 31 December 2007 totalled 1,570 thousand euro against 4,525 thousand euro at 31 December 2006,
the decrease of 2,955 thousand euro is mainly due to the reform of the Italian termination benefits (TFR) law which requires companies
with more than 50 employees to pay the part of accrued termination benefits to a fund selected by the individual employees.
The table below shows the movements of the provision:
thousands of euro
Balance at 01.01.07
Accrual for the year
Uses
Curtailment
Financial Charges
-
Balance at 31.12.07
4,525
145
280
2,896
76
1,570
The termination benefits are considered a defined benefit plan to be accounted for according to IAS 39, by applying the projected
unit credit method, which entails estimating the amount to pay to each employee when he leave the company and actualising this
payable based on a hypothesis on the times of leaving calculated using actuarial methods.
The assessment was performed with the support of an independent actuary.
pag
88
The main assumptions adopted are summarised in the following table:
Summarisation of Economic – Financial Technical Assumptions
Financial assumptions
December 2007
Annual rate of discounting back
Annual rate of inflation
Annual rate of termination benefit increase
Summarisation of Demographic Technical Assumptions
4.70%
2.00%
3.00%
Demographic assumptions
December 2007
Mortality
Disability
ISTAT 2000
INPS tables broken down by age and sex
Retirement ageAchievement of Obligatory General Insurance
Annual Turnover Frequency Table and Termination Benefit Advances
Company
Advance Frequency % December 2007
SNAI S.p.A.
2.50%
Turnover Frequency % December 2007
5.00%
25. FINANCIAL LIABILITIES
The table below shows the breakdown for financial liabilities:
31.12.2007
thousands of euro
31.12.2006
change
41,151
225,908
20,043
675
25,603
313,380
40,711
242,328
26,875
1,036
2,424
313,374
440
- 16,420
- 6,832
361
23,179
6
139
353
18,593
7,554
227
5,793
32,659
42
107
381
11,772
41,710
359
818
55,189
NON-CURRENT FINANCIAL LIABILITIES
Junior loan beyond 12 months
Senior loan beyond 12 months
Vendor loan due beyond 12 months
IBM Financial Services Loan due beyond 12 months
Payable for Leases due beyond 12 months
Total non-current financial liabilities
CURRENT FINANCIAL LIABILITIES
SNAI Servizi srl financial c/a
Valcarenga inter-group c/a
Mac Horse inter-group c/a
Senior loan within 12 months
Vendor loan
IBM Financial Services Loan
Payable for Leases
Total current financial liabilities
-
42
32
28
6,821
- 34,156
132
4,975
- 22,530
Financial payables include:
• loans taken out to acquire “concession” company branches (described in detail in the paragraphs below) entered at amortised
cost for a total of 285,652 euro, equal to a nominal 297 million euro recognised net of direct accessory charges. These
accessory charges include freelance fees connected to completion of the loan and register tax due when opening the loan;
the first instalment of the loan due 22 September 2007 was paid; the instalment due 22 March 2008, totalling a nominal
19 million euro was entered in the “Senior loan within 12 months” item again net of accessory charges for an amount of
18,593 thousand euro and has been promptly paid;
•
The payables due to BAP resulting from the acquisition of Concession company branches (Vendor loan), for the remaining
instalment rates existing at 31 December. The acquisition transaction entailed the payment of a part of the payment to pay at
the time of signing the claim acts (March 2006) and the installation payments of the vendor loan in five annual installations
of an equal amount, the first due 30 may 2007, without paying the interest due from SNAI S.p.A. By the end of the month
of January 2007 some BAP, following signing of an additional agreement proposed by SNAI S.p.A, received early reimbursement
of the vendor loan at a value discounted at the rate of 6.8%. Subsequently on 30 May 2007 the first instalment of the remaining
extensions was reimbursed, consequently at year end the vendor loan was represented as follows:
-20,043 thousand euro equal to the current value of the extended payable due beyond 12 months for subjects which did
not sign the additional agreement;
-7,554 thousand euro related to the instalment of the existing extensions due in May 2008;
pag
89
•
the payable for the IBM loan for a total of 902 thousand euro related to the supplementary service contract with IBM Italia
S.p.A., signed based on the necessary implementation for setting up the new points for accepting bets;
•
financial payables for lease contracts for a total of 31,396 thousand euro increased compared to the previous year due to
the signing of some lease contracts better described in note 14.
In 2006 the parent company in order to obtain the financial resources necessary to acquire company branches and for early
settlement of the remaining consolidated payable with banks, totalling euro 40.5 million in capital line occurring 29 March 2006,
and to increase its working capital, signed two loan contracts with its associates, namely with Unicredit Banca d’Impresa S.p.A.
(“Senior Loan Contract” and with Solar S.A. a Luxembourg company possessed at 70% by FCCD Limited, and Irish company and
30% by SNAI S.p.A: (“Junior Loan Contract” and with the Senior Loan Contract the “Loan Contracts”). Solar S.A. obtained the
financial resources necessary to pay the Junior Loan by issuing preferred equity certificates subscribed by third parties.
The Company and the lenders established – including by singing a so-called Intercreditor Agreement – that the Junior Loan Contract
be subordinate to the Senior Loan Contract and therefore that each payment due according to the Junior Loan Contract can be
paid to Solar S.A. only to the extent that all the payments have been paid due to Unicredit Banca d’Impresa S.p.A. based on the
Senior Loan Contract.
The financing granted based on the Senior Loan Contract (the “Senior Loan”) is divided into a tranche A up to 96.5 million euro
(“Tranche A”) and a tranche B up to 170 million euro (“Tranche B”).
The Senior Loan has a duration totalling five years, i.e. up to 15 March 2011. The interest rate applied to the Senior Loan is Euribor
at three months plus a margin which for Tranche A will be 2.75% annually and for Tranche B 5.15% annually. This margin can
be reduced by 0.25% for Tranche A and 0.5% for Tranche B if the Company reaches specific established levels in the ratio between
total net borrowing and annual EBITDA. In the latest payments the effective interest was calculated and charged with the adjustment
of the above margin, since the established levels were reached.
The Senior Loan Contract requires that Tranche A per repaid passed on an amortisation plan, with the exception of a pre-amortisation
plan for the first eighteen months. Thus the repayments for Tranche A will be paid at the eighteenth, twenty-fourth, thirty-sixth, fortyeighth and sixtieth month from the date of first use, i.e. 21 March 2006.
Tranche B for the Senior Loan will be paid in its entirety at the due date of the Senior Loan and will be subordinate to complete
repayment of Tranche A.
On 21 March 2006 the Company asked for and obtained payment of a first part of the two Senior Loan and Junior Loan tranches
for a total amount of around 175 million euro (of which 23.7 million euro from the Junior Loan). The requested sums were obtained
with accreditation days of 21 and 24 March 2006, respectively.
On 31 March 2006 the Company asked for payment of the remaining 135 million euro for the two tranches of the Senior Loan
and Junior Loan: the payment was obtained in the first days of April 2006.
On 20 October 2006 SNAI S.p.A. obtained Waivers from the lenders to be able to sign a contract for a line of credit for guarantees
of 140 million euro needed for the call for tenders for new bet acceptance licences based on Italian Legislative Decree 223 of
04.07.2006.
Following what was established in the Waivers, SNAI has the right to repay the Senior Loan tranche A early starting from the second
anniversary of the first use until the third anniversary by paying some costs and a fee for early repayment totalling 2% of the early
repaid amount and 1% of the early repaid amount from the third to fourth anniversary.
Any amounts repaid early after the fourth year will only be subject to specific costs but not to fees.
Thus SNAI S.p.A. has the right to repay the Senior Loan tranche B early starting from 30 months from the first use until the third
anniversary by paying some costs and a fee for early repayment totalling 2% of the early repaid amount and 1% of the early repaid
amount from the third to fourth anniversary. Any amounts repaid early after the fourth year will only be subject to specific costs but
not to fees.
The loan granted based on the Junior Loan Contract (“Junior Loan”) totals 43.5 million euro and has a duration of five years, i.e.
until 24 March 2011. The interest rate applied to the Junior Loan is Euribor at three months, plus a margin of 14.3% annually. In
the latest payments, this margin was reduced by 0.5% since the company reached the specific established levels in the ratio between
total net borrowing and annual EBITDA.
The effective interest was calculated and charged with the adjustment of the above margin.
The Junior Loan will be entirely repaid at its due date and subordinate to the complete repayment of the Senior Loan.
Based on the Waivers, for this loan as well the Company has the right to early repayment of the Junior Loan starting from 30 months
to the fourth year by payment of some costs and a fee for early repayment totalling 2% of the early repayment and 1% of the early
repayment in the fourth year. Any amounts repaid early after the fourth year will only be subject to specific costs but not to fees.
pag
90
As is customary with this type of loan, the Loan Contracts entail a series of obligations for the Company which, with the exception
of what is described above, are substantially the same for both Loan Contracts.
The Company has made a commitment to the lenders to comply with a series of financial parameters mainly connected to the trend
of EBITDA on a consolidated level and total net borrowing of the Company.
Verification of compliance with these financial commitments will be done on a quarterly basis.
An analysis and comments related to the covenants are included in paragraph 36.2 of the explanatory notes to the consolidated
accounting situation.
In particular, by means of example but not limited to, the Company is also committed to:
(i) provide the lenders updates on operations and consolidated accounts on a monthly basis as well as all quarterly and six month
reports and statutory financials statements as soon as they are available in accordance with applicable law, (ii) obtain and/or
maintain all the authorisations necessary for its compliance in accordance with contracts the Company is party to, (iii) act in
compliance with applicable laws and not establish (or act so as to establish) new guarantees and/or liens on Company assets
and other Gruppo SNAI components which out previous approval from the lenders, (iv) not transfer (or act so as to transfer) its assets
or those of other Gruppo SNAI components, for a value of more than 5 million euro, for the entire duration of the loans, except to
perform ordinary activity and at market terms and, any income realised is used to develop Company activities, etc.
The occurrence of any significant event, for example, (i) Company’s breach of the commitments assumed under the Loan Contracts,
(ii) declaration of insolvency by one of the Gruppo SNAI components, (iii) non-compliance for a value over the specifically agreed
ceilings, by any of the Gruppo SNAI components in related to the related borrowing, which is not immediately remedied if possible,
(iv) exit of any of the subsidiaries from Gruppo SNAI, (v) loss of licences, authorisations or service contracts which produce more
than the total Group turnover, which shall result in the forfeiture of the Company’s acceleration clause with the consequence that
the lenders in this case can ask for the immediate repayment of all the sums paid and not repaid up to that time.
In terms of the collateral backing the above loans, a mortgage has been established on SNAI S.p.A. property and, in particular,
on the property which is part of the Milan Trot area and real estate portfolio represented by the Montecatini Terme race track and
the property which is part of the Milan Gallop area.
In particular a first and second mortgage has been established on this property to back the two loan tranches granted by Unicredit
Banca d’Impresa as well as a third mortgage to back the loan granted by Solar S.A.
Other guaranties granted in favour of Unicredit Banca d’Impresa S.p.A. and di Solar S.A., all first and second, as represented
by:
(i) pledge granted by SNAI Servizi S.r.l. on SNAI S.p.A. shares it possesses, totalling 50.68% of the SNAI S.p.A. share
capital;
(ii) pledge on the SNAI S.p.A. equity investments in the subsidiaries Festa S.r.l., Immobiliare Valcarenga S.r.l., MAC Horse
S.r.l and equity investment in Teleippica S.r.l.;
(iii) pledge on the current accounts of SNAI S.p.A., as well as pledge on the current accounts of Festa S.r.l. and MAC Horse
S.r.l.
26. PROVISIONS FOR FUTURE RISKS AND CHARGES
As of 31 December 2007 these totalled 7,312 thousand euro, the table below shows the break down of changes:
Balance at 31.12.06 Use of provision Reallocated amounts accrual for year
Balance at 31.12.07
La Television equity investment
Risto Misto equity investment
Teseo equity investment
Tivù+ equity investment
Pension Fund
Florence INPS office
Civil disputes and contractual risks
Slot Network renewal
207
207
1,330
50
18
879
135
2,826
- 197
- 10
394
950
- 18
10
- 215
-
10
2,523
824
4,701
207
1,724
1,000
889
2,668
824
7,312
The provision for future risks and charges was established to take into account risks associated with the liquidation of some group
companies and represents the maximum amount that the company is willing to sustain to close the various proceedings. This provision
is composed of total accruals made in previous periods and what was accrued during the year to adjust the provision for risks
related to the subsidiary Teseo S.r.l. in liquidation for 394 thousand euro and sister company Tivù + S.p.A. in liquidation for 950
pag
91
The Florence INPS office item contains the amount of the provision for risks for remaining disputes of the subsidiary Ippodromi San
Siro S.p.A. (formerly Trenno S.p.A.) merged with SNAI S.p.A., which are still in progress with the Florence INPS office for 889
thousand euro. The accrual for the period for 10 thousand euro is related to interest on the dispute with the Florence INPS office.
Risks for civil disputes and contractual risks contains to total estimated amount to cover the remaining risk entries related to the
settlement of transactions and disputes with third parties, including of a fiscal, tax and contribution nature and total 2,668 thousand
euro.
Moreover, in 2007 a provision was set up to accrue 824 thousand euro related to technological upgrading as required by article
19 of the “Specifications” for “assignment in concession of the activation and operation of the computerised management network
for legal gaming using amusement machines as well as connected activities and functions” from the starting date of the concession.
Administrative Disputes for presumed breaches
SNAI S.p.A., as licensee for the management of the computerised network for interconnection of amusement machines received
in June 2007 a notice from the Regional Public Prosecutor’s Office of the Region of Lazio Audit Office asking it to submit its own
deduction related to an enquiry on a possible tax offence.
The regional Public Prosecutor charged SNAI, along with three managers from the Autonomous Administration of State Monopolies,
with inexact fulfilment of some concession obligations and failure to comply with some ser vice levels.
After and with reference to the enquiry of the Regional Public Prosecutor, AAMS, with an act signed by one of the managers involved
in the proceeding started by the Public Prosecutor, served SNAI and all the other nine licensees with the same breaches, not
considering any evaluation on the point and as a precautionary measure. AAMS reserved the right to make a final decision following
deductions presented by the concessions. SNAI S.p.A., as stated above, submitted its deductions within the deadlines disputing
the ground of the charges. To this end SNAI S.p.A. has already obtained legal opinions which confirm its position: the disputed
sanctions are not applicable and consequently the requested amounts are not due.
with service levels. SNAI S.p.A. is certain to have completely fulfilled its concession obligations, the most important being the
complete payment of the Single Tax Withholding (PREU) and concession fee. The Board of Directors, including based on the legal
opinions obtained, believe that no type of liability for the company can emerge from these proceedings, nor will there be negative
results of an equity nature.
It is important to note that on 25 July 2005 the second session of the Lazio Regional Court accepted the suspension request submitted
by SNAI against the administrative sanction which ordered payment of penalties for around 4.8 billion euro; The Lazio Regional
Court held the hearing on 23 Januar y 2008 and the company is waiting for publication of the ruling.
27. VARIOUS ACCOUNTS PAYABLE AND OTHER LIABILITIES
The various non - current accounts payable and other liabilities are composed as follows:
thousands of euro
31.12.2007
31.12.2006
13,757
90
13,847
18,374
1,168
19,542
Determined Payables due to AAMS
Inps injunctions
Total other non-current accounts payable and other liabilities
pag
92
change
-
4,617
1,078
5,695
The various current accounts payable and other liabilities are composed as follows:
thousands of euro
31.12.2007
31.12.2006
difference
5,687
7,301
270
48
6,385
19,691
2,027
235
335
7,645
31
76
10,349
3,660
7,301
35
- 287
-1,260
31
76
9,342
703
1,078
7
61
72
1,921
555
898
7
2
45
17
1,524
148
180
2
16
55
397
606
114
3
693
1,200
615
876
1,860
1,547
1,386
4,453
232
5,487
11,820
2,677
33,569
620
151
7
559
5,076
215
426
1,293
921
1,119
5,011
113
11,248
9,852
2,164
38,775
14
37
4
134
-3,876
400
450
567
626
267
- 558
119
- 5,761
1,968
513
- 5,206
832
832
28
28
804
804
56,013
50,676
5,337
Tax liabilities:
Tax liabilities for income taxes
VAT liability
Irpef liability for Employees
Irpef liability for Freelances
Single Tax on Bets liability
Slot machine withholdings
Other taxes
Liabilities with Social Security Institutions
Inps
Inps injunctions
Inail
Enasarco
Previndai
Supplementary pension funds
Other current payables:
due to directors
due to statutory auditors
due to freelancers
due to employees
due to AAMS for weekly balances on Events Outcome Contests
due to others for Events Outcome and Ippica Nazionale winnings
for security deposits
for SNAI Card gaming balances
to bettors for accepted bets
to bettors for winnings
to U.N.I.R.E. for fifteen day balances
to SOGEI for fixed tickets
to AAMS for determined payables
to AAMS for PREU balances
to others
-
Accrued expenses and deferred income:
other deferred income
Total other current accounts payable and other liabilities
Tax liabilities includes the current liability for single tax totalling 6,385 thousand euro accrued in the month of December on sports
and horse racing bets paid on 16 January 2008.
The other liabilities due to social security institutions includes a liability due to INPS related to an unfavourable ruling issued by the
Cassation Court in December 2004 on a dispute between INPS and the subsidiary Ippodromi San Siro S.p.A (formerly Società
Trenno S.p.A.), in relation to contributions for employees at the totalisator of the Milan horse race tracks, that, following acceptance
of the reduction of the fines and instalment plan, was accounted for in noncurrent payables for 90 thousand euro and in current
payables for 1,078 thousand euro.
The other liabilities include determined payables due to AAMS for the suspended single tax and for the guaranteed minimums
accrued and conferred with the acquisition of the Concession company branches not yet due, in particular:
•
13,757 thousand euro (18,374 thousand euro), equal to the annual payments due starting from 31 October 2009 of payables
for the guaranteed minimums accrued at the effective date of transfer of the company branches beyond 12 months, discounted
at 31 December 2007 at the rate of 7.3% which represents the market cost of financial instruments;
•
5,487 thousand euro related to the payments due within 12 months for the guaranteed minimums and for the suspended single
tax.
Payables due to AAMS for the weekly balances on events outcome contests totalling 1,200 thousand euro are related to weekly
balances not yet collected by AAMS due to movements in events outcome contests.
pag
93
Payables were also recorded on acceptance of horse racing and sports bets in directly managed concessions following acquisition
of the Concession company branches related to:
- balance of SNAICard computerised gaming cards (1,860 thousand euro);
- payables recorded for collected bets up to 31 December 2007 and for which the events have not yet taken place (antepost
betting) for 1,547 thousand euro;
- payables due to bettors for accrued winnings not collected at 31 December 2007 (1,386 thousand euro) and ippica nazionale
winnings (615 thousand euro);
- payable due to SOGEI for the UNIRE horse racing withholding due for the second half of December and paid on 5 January 2008
(4,453 thousand euro);
- payable due to SOGEI for the winning and reimbursable tickets prescribed in December and paid on 5 January 2008 (232
thousand euro);
The other current payables include the net liability related to the single withholding (PREU), 11,820 thousand euro, calculated every
fifteen days on the movement of amusement machines (slot machines), starting 1 January 2007 the tax rate dropped from 13.5%
to 12%. At the 23 January 2008 due date the company had paid 13,226 thousand euro for PREU based on its counts on the
existing number of machines for the half month; the counts are not in line wit the AAMS counts. During the first months of 2008
AAMS asked the company to pay a higher concession fee of 109 thousand euro calculated on taxable income from the last two
bimonthly periods of 2007.
The requested amounts were recorded on the credit side, paid in 2008 and at the same time disputed by the company while
waiting to obtain realignments. Recently methods and counts have been compared with AAMS and the company is confident that
it will be able to define them in the amount of credit already expressed in its books, also in consideration of the outcome of expert
reports on the counting methods used by the company.
The balance of payables due to others is mainly composed of the payable for the Slot Machine fee related to the NovemberDecember 2007 bimonthly period.
The deferred income item totalling 832 thousand euro refers to the amount not yet accrued of income invoiced ahead of time for
the sale of the option right.
28. ACCOUNTS PAYABLE
The table below shows the breakdown of accounts payable:
31.12.2007
thousands of euro
Current accounts payable:
due to suppliers
due to foreign suppliers
due to sister company suppliers
for invoices to receive from SNAI Servizi S.r.l.
for invoices to receive from Festa
for invoices to receive from Trenno
Total
26,377
174
585
49
32
19
27,236
31.12.2006
-
26,729
1
63
938
29
27,758
change
-
-
352
175
522
49
906
10
522
29. FINANCIAL COMMITMENTS
The sureties issued total 226,645 thousand euro (152,646 thousand euro) and refer to:
- 35,389 (27,376) thousand euro to sureties issued by various banks to AAMS, requested for the legal gaming concession for
amusement machines, to back the fifteen day payment of the PREU balance and concession payment as required by article 20
paragraph 4 of the Concession due 31 October 2011;
- 1,463 (1,463) thousand euro for sureties issued to Cassa di Risparmio Firenze for Teleippica S.r.l., to back a loan signed by
the sister company;
- 3,095 thousand euro for UNIRE to back transfer of the concession for bet acceptance for the concessions 175-341-95-345438-446-170-408-340-215.
- 1,113 (1,235) thousand euro for AAMS to back transfer of the concession for bet acceptance for the concessions 1625-15211500-1627.
- 203 thousand euro surety for AAMS to back payment of the instalment related to the payables accrued by the licensee due to
the tax authority and Italian Olympics Committee for the concessions 223-465-1258-3702-3539.
- 344 thousand euro surety for AAMS to back the sports concession obligations for the concessions 223-465-1258-3702-3539.
- 90 thousand euro surety for AAMS to back the horse concession obligations for the concession 1258.
- 203 (203) thousand euro for the municipality of Milan for building permits;
- 490 (137) thousand euro sureties for the Ministry of Economic Development to back prizes promoted for the prize contests;
- 20 thousand euro for Fiorentina Gas to back the gas supply contract;
pag
94
- 25,806 (25,806) thousand euro sureties for UNIRE to back the concession obligations related to Horse racing Concessions;
- 7,585 (7,585) thousand euro sureties for UNIRE to back the structured loan related to Horse racing Concessions;
- 12,644 (14,906) thousand euro sureties for AAMS to back payment obligations for accrued payables for Sports Concessions;
- 45,890 (11,500) thousand euro sureties for AAMS to back opening of horse race gaming shops and corners and activation of
remote horse race gaming;
- 45,640 (14,750) thousand euro sureties for AAMS to back opening of sports gaming shops and corners and activation of remote
sports gaming;
- 17,402 (15,750) thousand euro sureties for AAMS to back correct execution of Sports Concession obligations;
- 7,630 (7,630) thousand euro sureties for AAMS to back correct execution of Horse Racing Concession obligations;
- 16,620 thousand euro sureties for AAMS to back payment obligations for accrued payables for Horse Racing Concessions;
- 18 (18) thousand euro sureties for Esselunga S.p.A. to back the obligations under a sublet contract;
- 5,000 thousand euro sureties for AAMS to back obligations assumed with the submission of an application to participate in the
selection for awarding the operating concession and development of national totalisator numeric games.
The company has undertaken commitments for operating leases of computerised equipment mainly used to operate the gaming
network and terminals for accepting horse racing and sports bids for 21,263 (12,872) thousand euro of which with remaining
payable within 12 months for 6,932 thousand euro, more than 12 months but less than 5 years for 13,891 thousand euro and
331 thousand euro beyond 5 years.
During the first half of 2006 the company obtained a loan for the acquisition of “Concession” company branches, against which
the following guarantees were issued:
- First mortgage issued by SNAI S.p.A. in favour of Unicredit on 16 March 2006 on the race Tracks of Milan and Montecatini
and the Headquar ters in Porcari (LU), value 193,000 thousand euro, Notar y Public Cambareri File;
- Second mortgage issued by SNAI S.p.A. in favour of Unicredit on 16 March 2006 on the race Tracks of Milan and Montecatini,
value 340,000 thousand euro, Notary Public Cambareri File;
- Third mortgage issued by SNAI S.p.A. in favour of Solar s.a. on 16 March 2006 on the race Tracks of Milan and Montecatini
and the Headquar ters in Porcari (LU), value 87,000 thousand euro, Notar y Public Cambareri File;
- First pledge on the Equity Investment Festa S.r.l issued on 16 March 2006 by SNAI S.p.A. in favour of Unicredit, value 1,000
thousand euro, Notary Public Cambareri file 16093;
- First pledge on the Equity Investment Immobiliare Valcarenga S.r.l issued on 16 March 2006 by SNAI S.p.A. in favour of Unicredit,
value 51 thousand euro, Notary Public Cambareri file 16094;
- First pledge on the Equity Investment Mac Horse S.r.l issued on 16 March 2006 by SNAI S.p.A. in favour of Unicredit, value
26 thousand euro, Notary Public Cambareri file 16092;
- First pledge on the Equity Investment Teleippica S.r.l issued on 16 March 2006 by SNAI S.p.A. in favour of Unicredit, value 495
thousand euro, Notary Public Cambareri file 16091;
- Second pledge on the Equity Investment Festa S.r.l issued on 16 March 2006 by SNAI S.p.A. in favour of Solar S.a., value
1,000 thousand euro, Notary Public Cambareri file 16096;
- Second pledge on the Equity Investment Immobiliare Valcarenga S.r.l issued on 16 March 2006 by SNAI S.p.A. in favour of
Solar S.a., value 51 thousand euro, Notary Public Cambareri file 16097;
- Second pledge on the Equity Investment Mac Horse S.r.l issued on 16 March 2006 by SNAI S.p.A. in favour of Solar S.a.,
value 26 thousand euro, Notary Public Cambareri file 16098;
- Second pledge on the Equity Investment Teleippica S.r.l issued on 16 March 2006 by SNAI S.p.A. in favour of Solar S.a., value
495 thousand euro, Notary Public Cambareri file 16095;
- First pledge issued by SNAI S.p.A. in favour of Unicredit on current accounts in the name of SNAI S.p.A. as listed below:
Banca Nazionale del Lavoro S.p.A. Agenzia Lucca Sede Abi 01005 Cab 13701 c/a 41924
Monte dei Paschi di Siena S.p.A. Agenzia Lucca Sede Abi 01030 Cab 13700 c/a 27298/36
Monte dei Paschi di Siena S.p.A. Agenzia Roma Sede Abi 01030 Cab 03202 c/a 1628546
Monte dei Paschi di Siena S.p.A. Agenzia Milano Sede Abi 01030 Cab 01604 c/a 13734/08
Monte dei Paschi di Siena S.p.A. Agenzia Lucca Sede Abi 01030 Cab 13700 c/a 1643343
Banca di Roma S.p.A. Agenzia n. 1 Lucca Abi 03002 Cab 13700 c/a 653388/58
Cassa di Risparmio di Lucca Agenzia 4 Abi 06200 Cab 13704 c/a 274955
Cassa di Risparmio di Lucca Pisa Livorno Agenzia 4 Abi 06200 Cab 13704 c/a 177652
Banca Popolare di Milano S.c.a.r.l. Agenzia 7 di Milano Abi 05584 Cab 1607 c/a 48091
Banca CR Firenze S.p.A. Agenzia Capannori Abi 06160 Cab 24700 c/a 4723C01
Banca Nuova S.p.A. Agenzia Roma 1 Abi 05132 Cab 3201 c/a 6736
Credito Artigiano S.p.A. Agenzia Milano S.Fedele Abi 03512 Cab 1601 c/a 7602
Unicredit Banca d’Impresa S.p.A. Agenzia Bologna 42 Abi 03226 Abi 02460 c/a 2896061
Banco Posta Agenzia Sede Lucca Abi 07601 Cab 13700 c/a 65065567
- First pledge issued by the subsidiaries Festa S.r.l. and Mac Horse S.r.l. in favour of Unicredit on current accounts in their names.
- Second pledge issued by SNAI S.p.A. in favour of Solar S.a. on current accounts in the name of SNAI S.p.A. as listed below:
pag
95
- Second pledge issued by the subsidiaries Festa S.r.l. and Mac Horse S.r.l. in favour of Solar S.a. on current accounts in their
names.
- First pledge issued 16 March 2006 by SNAI S.p.A. in favour of Unicredit Banca d’Impresa S.p.A. on 39 trademarks and 2
patents owned by the company, Notary Public Cambareri file 16099;
- Second pledge issued 16 March 2006 by SNAI S.p.A. in favour of Solar S.a. on 39 trademarks and 2 patents owned by the
company, Notary Public Cambareri file 16100.
On 20 October 2006 the company obtained Waivers from the lenders to be able to sign a contract for a line of credit for
guarantees of euro 140,000,000.00 needed for the call for tenders for new bet acceptance licences based on Italian Legislative
Decree 223 of 04.07.2006. This line of credit was used to issue definite sureties of euro 45,640,000.00 and euro 45,890,000.00
as specified above. On 27 September 2007 Waivers were obtained from the lenders to sign a new contract for a line of credit
for guarantees of euro 305,000,000.00.
On 27 September 2007 a contract was signed with a leading bank for this line of credit, aimed at SNAI S.p.A.’s participation
as a candidate in the selection procedure for awarding the concession to run and develop national totalisator numeric games.
On the same date a surety was issued for euro 5,000,000.00, as described above, which is now extinguished.
On 27 December 2007, based on a decision from the Court of Lucca, a distraint was issued in favour of Vision Srl on c/a Cassa
Risparmio Lucca Pisa Livorno for a sum totalling euro 250,000.00.
30. RELATED PARTIES
The Consob communication 6064293 of 28 July 2006 requires that, in addition to what is required by the international accounting
standard related to “Disclosure of related party transactions” (IAS 24) information be provided on the incidence which transactions
or positions with related parties, as classified by the same IAS 24, have on the profit, loss, asset, liability and financial situation.
The table below shows these incidences. The incidences which the transactions have on profit and loss as well as cash flow of
the company and/or Group need to be analysed considering that the main transactions existing with related parties are all identical
to the equivalent contracts existing with third parties: therefore in the current situation there is no difference in treatment between
related parties and third parties.
commercial or financial nature, and for services of an administrative, financial and tax consultation, tax and organisation nature
with subsidiaries and contracts with the parent company SNAI Servizi S.p.A. for legal assistance services and for regulation of
the financial current account.
The transfer prices are related to active sales prices to the betting collection chain (i.e. market prices); purchase costs for services
governed by commercial contracts use market prices and conditions as a reference for contracts of a financial nature and operating
costs for services and performance for the other buying and selling of inter-group services.
The contracts, including services supplied by some subsidiaries for other group companies, as well as those supplied by SNAI
S.p.A. to other group companies and performance of services between operating companies, are formalised and invoiced with
multi-year frequency.
The company performs services for the concessionaries of horse racing agencies and sports agencies, as explained above. Many
licensees hold minority interests in the share capital of the parent company SNAI Servizi S.r.l. Transactions, in standardised contracts,
are governed at market conditions completely identical to those of third party licensees.
pag
96
The acquisition transaction of the company branches occurring on 16 March 2006 is basically the result of a transaction with
related parties since most of the company branches acquired by SNAI S.p.A. were directly or indirectly referable to members of
the SNAI S.p.A. board of directors, who were owners, directly or indirectly, through the companies they hold investments in or
which are under their families. In particular of the 450 transferred branches, 236 branches were under the aforesaid subjects,
301 branches under shareholders of the parent company SNAI Servizi S.r.l. and 2 branches the subsidiary Festa S.r.l. The total
number of acquired company branches by related parties was 365.
By application of article 2391-bis of the Italian Civil Code and recommendations of the self-governance code, the company relied
on the consultation of independent experts, asking for a Fairness Option, which confirmed the congruity of the amount paid by
the company to acquire the company branches, directly or indirectly attributable to the directors. The amount paid to the directors
totalled 204.9 million euro, that to the shareholders of the parent company SNAI Servizi S.r.l. 256.3 million and that related to
the subsidiary 0.69 million euro. The sum of the amounts paid to related parties for a total of 302.8 million euro represents 84.46%
of the total amount paid.
The clauses in the company branch acquisition contracts, as well as those for management and service contracts, with counterparts
being the shareholders of the parent company are completely identical to similar contracts with third parties. With the company
branch acquisition SNAI S.p.A. also signed management contracts, to use services connected with operational management of
the corner, with gaming acceptance corner which transferred the concessions. The payment was in line with the total volume of
bets collected for all the acquired company branches with the same percentage used for concession company branches acquired
from third parties that are not shareholders of the parent company SNAI Servizi S.r.l. The same contractual conditions applied to
third parties were also applied to the shareholder managers of the parent company SNAI Ser vizi S.r.l.
The table below summarises the following:
- the amount of accounts receivable for services and products and receivables for the collection of horse race and sports bets, for
ippica nazionale betting, event outcome contests and amusement machines, which existed at 31 December 2007 and 31 December
2006 between SNAI S.p.A. and the other group subsidiaries with shareholders of the parent company SNAI Servizi S.r.l., to whom
the same companies supply services within the framework of their institutional activities;
- the amount of financial receivables;
- the amount of accounts payable and financial payables;
It is important to note that some directors of the group companies are also shareholders of the parent company SNAI Servizi S.r.l.,
although they do not hold significant or controlling shareholdings.
pag
97
thousands of euro
Accounts receivable:
- due from SNAI Servizi S.r.l. shareholders
- due from SNAI Servizi S.r.l.
- due from Trenno S.r.l.
- due from Festa S.r.l.
- due from TIVU+ S.p.A. in liquidation
- due from Teleippica S.r.l.
- due from Connext S.r.l.
Total accounts receivable
31/12/2007
incidence %
31/12/2006
incidence %
3.691
2.026
216
4
18
2
5.957
7,19%
0,00%
3,95%
0,42%
0,01%
0,04%
0,00%
11,61%
3,054
6
672
131
6
1
3,870
6.27%
0.01%
1.38%
0.27%
0.01%
0.00%
0.00%
7.94%
0,00%
0,00%
371
371
18,88%
18,88%
Other noncurrent non-financial assets:
-
Other current assets:
- due from Mac Horse
- due from Immobiliare Valcarenga
3.893
404
78
25
1
715
5.116
12,39%
1,29%
0,25%
0,08%
0,00%
2,28%
16,29%
3.241
85
18
478
3.822
23,34%
0,00%
0,61%
0,13%
0,00%
3,44%
27,52%
Financial receivables:
- due from Festa S.r.l.
- due from La Televisione S.r.l. in liquidation
- due from Ristomisto S.r.l. in liquidation
- due from Tivu+ S.p.A. in liquidation
- due from Teseo S.r.l. in liquidation
Total financial receivables
Total receivables
13
18
338
308
1.665
1.724
874
4.940
16.013
0,06%
0,09%
1,67%
0,00%
1,53%
8,25%
8,54%
4,33%
24,47%
15,25%
1.432
1.845
122
121
1.211
1.476
133
6.340
14.403
0,00%
22,53%
29,02%
1,92%
1,90%
19,05%
23,22%
2,09%
99,73%
20,31%
268
49
19
32
43
395
148
954
0,98%
0,18%
0,07%
0,12%
0,16%
1,45%
0,54%
3,50%
769
35
939
43
20
394
2.200
2,77%
0,00%
0,13%
3,38%
0,15%
0,07%
1,42%
7,92%
18.495
5,90%
32.840
42
107
381
33.370
54.065
76.27%
0.10%
0.25%
0.88%
77.50%
12.43%
Accounts payable:
- due to SNAI Servizi S.r.l. shareholders
- due to SNAI Servizi S.r.l.
- due to Trenno S.r.l
- due to Festa S.r.l.
- due to Tivu+ S.p.A. in liquidation
- due to Teleippica S.r.l.
- due to Connext S.r.l.
Total accounts payable
Non-current financial payables:
- due to SNAI Servizi S.r.l. shareholders for extension of company branch acquisitions
Current financial payables:
- due to SNAI Servizi S.r.l. shareholders for extension of company branch acquisitions
- due to Immobiliare Valcarenga
139
- due to Mac Horse S.r.l.
353
Total current financial payables
6.019
Total payables
21.399
14.426 4,60%
5.527 16,92%
0,00%
0,43%
1,08%
18,43%
5,02%
The financial receivables are recorded net of the specific bad debt provision.
The table below shows:
- the income for services and products and services performed for the collection of horse race and sports bets, for ippica nazionale
betting, event outcome contests and amusement machines, which existed at 31 December 2007 and 31 December 2006 between
SNAI S.p.A. and shareholders of the parent company SNAI Servizi S.r.l., to whom the same company supplies services within
the framework of their institutional activities;
- financial income;
- the costs for services and charge backs, costs related to amusement machines, existing at 31 December 2007 between SNAI
S.p.A. and shareholders of the parent company SNAI Servizi S.r.l., for whom the same company supplies services within the
framework of its institutional activities.
- costs for interest and fees.
pag
98
thousands of euro
31/12/2007
Income from services and charge backs:
- from SNAI Servizi S.r.l. shareholders
- from Festa S.r.l.
- from Trenno S.r.l
- from Teleippica S.r.l.
Total income from services and charge backs:
Other revenue
- from SNAI Servizi S.r.l.
- from Festa S.r.l.
- from Mac Horse S.r.l.
- from Trenno S.r.l
- from Immobiliare Valcarenga S.r.l.
- from Tivu+ S.p.A. in liquidation
- from Connext S.r.l.
Total Other revenue
Interest income:
- from SNAI Promotion S.r.l. in liquidation
- from Festa S.r.l.
- from Trenno S.r.l
- from La Televisione S.r.l. in liquidation
- from Ristomisto S.r.l. in liquidation
- from Teseo S.r.l. in liquidation
Total interest income
Total revenue
Cost for semi-finished and finished product acquisition
Total cost for semi-finished and finished product acquisition
Cost for used raw materials and consumables
- from Festa S.r.l.
Total cost for used raw materials and consumables
Cost for services and charge backs:
- from Festa S.r.l.
- from Trenno S.r.l.
- from Mac Horse S.r.l.
- from Immobiliare Valcarenga S.r.l.
Total cost for services and charge backs
Cost for personnel posted to other areas
- from Festa S.r.l.
Total cost for personnel posted to other areas
Interest expense and fees
Fees on sureties from SNAI Servizi S.r.l.
Interest expense from SNAI Servizi s.r.l.
Interest expense from Festa s.r.l.
Interest expense from Trenno s.r.l.
Interest expense from Mac Horse S.r.l.
Interest expense from Teleippica S.r.l.
Interest expense from Immobiliare Valcarenga S.r.l.
Imputed financial charges on Vendor Loan due to shareholders
Total interest expense and fees
Total costs
pag
incidence %
31/12/2006
incidence %
8.809
5.494
14.303
1,88%
0,00%
1,17%
0,00%
3,05%
11.178
37
1.517
3
12.735
5,31%
0,02%
0,72%
0,00%
6,05%
178
314
33
320
13
4
375
9
1.246
2,37%
4,19%
0,44%
4,27%
0,17%
0,05%
5,00%
0,12%
16,61%
186
395
33
56
13
217
423
1.323
3,43%
7,29%
0,61%
1,03%
0,24%
4,01%
7,81%
0,00%
24,42%
319
84
64
3
82
151
177
158
1.038
16.587
6,74%
0,00%
1,78%
1,35%
0,06%
1,73%
3,19%
3,74%
3,34%
21,93%
3,45%
186
4
20
36
7
60
105
100
518
14.576
10,24%
0,22%
1,10%
1,98%
0,39%
3,30%
5,78%
5,50%
0,00%
28,51%
6,70%
170
170
-
-
-
29
92
121
-
-
-
75.490
510
5.070
133
599
528
73
83.061
21,47%
0,15%
1,44%
0,04%
0,17%
0,00%
0,15%
0,21%
23,63%
63.153
441
3.916
45
624
43
793
344
69.359
49,61%
0,35%
3,08%
0,04%
0,49%
0,03%
0,62%
0,27%
54,49%
125
33
158
1,59%
0,42%
0,00%
2,01%
122
39
30
191
0,80%
0,25%
0,20%
1,25%
1
60
3
33
12
1.363
1.472
84.982
0,00%
0,00%
0,14%
0,01%
0,08%
0,00%
0,03%
3,20%
3,46%
21,14%
76
83
23
278
5
2.099
2.564
72.114
0,25%
0,00%
0,27%
0,00%
0,08%
0,92%
0,02%
6,93%
8,47%
41,70%
99
31. FINANCIAL RISK MANAGEMENT
The company has financial liabilities which are mainly composed of bank loans, loans granted by others (e.g. vendor loan, etc.)
and finance and operating lease contracts. These contracts are medium and long term, in part not remunerated.
These liabilities were undertaken based on important strategic development operations planned and implemented in 2006 and
2007 in order to acquire new concession company branches and new licences to consolidate and implement the company’s
presence in its market. A decision was also made to increase the Share Capital of SNAI Spa, concluded in January 2007, used
to obtain financial resources for 249,961 thousand euro, to use to support the investments necessary for the development plan
and permit sufficient cash autonomy and flexibility.
The company’s policy is to reduce the use of burdensome credit to back ordinary operations, reduce the time for collecting accounts
receivable, programme times and extension instruments for accounts receivable and plan and diversify the payment methods for
investments.
Credit risk
In order to reduce and monitor credit risk SNAI S.p.A. has adopted suitable organisational policies and instruments. SNAI S.p.A.
is familiar with and knows its debtors (customers, manager of gaming shops and corners, etc.) very well, thanks to its consolidated
and many years of presence in all market segments it targets, characterised by a limited number of participating operators.
New potential relations, following the assignment of the “Bersani” call for tender licences, mainly come from already known
commodity segments, with more limited and fractioned volumes, thus with lower potential risks.
Potential income related transactions are always previously subjected to a reliability analysis using the aid of information from
leading specialised companies. The obtained analyses are appropriately supplemented with objective and subjective elements,
deemed useful and already available within the Group, generating a reliability assessment.
A high percentage of income relations are previously covered by sureties or security deposits, issued in favour of the Group based
on the characteristics determining the reliability assessment. Established relations are constantly and regularly monitored by a structure
specifically dedicated for this function, connected to other interested and involved functions. The extremely brief timeframe of
collections, generally weekly or fortnightly, makes it possible to reduce the risk, in part thanks to the collection method by direct
debiting.
In some income relations the credit risk is limited by adopting special measures, such as suspension of the service in short timeframes,
until settlement of the position.
Payment extensions, by means of written agreements and application of interest on the extension and with issue of notes (in almost
all cases) are only allowed in extremely limited and circumspect cases, after previous evaluation and manager’s authorisation.
Receivables are subject to an analytical assessment on a regular basis.
The risk concerning other financial assets of the company is extremely limited.
Interest rate risk
SNAI S.p.A. has signed some loan contracts, mainly at a variable rate; some of these contracts entail extensions which are not
remunerated. The liquid assets and significant cash flow generated by the core business, treated by parameterising the interest
income rate to euribor trend, thus limiting the risk of changes in interest rate resulting from loan contracts at a variable rate also
parameterised to euribor, mostly at three months.
The centralised management of the Group’s cash flow, by using inter-group current accounts, make it possible to optimise cash
management and reduce risks and charges at the same time, maximising financial proceeds.
Liquidity risk
SNAI S.p.A. is required to manage incoming and outgoing cash flow (e.g. Preu, Single Tax on bets, etc.) in very short and preestablished timeframes both for incoming and outgoing. Thus the company possesses a fair liquidity and controls liquidity risk by
means of various management policies.
Extensions on collections are reduced to a minimum, by adopting adequate timeframes and instruments which are under direct
control of the company.
The management of orders to creditors entails a preliminary planning stage aimed at diversifying payment instruments and searching
for the broadest and least burdensome timeframes.
In the presence of investments the adopted policy has determined a prudential approach aimed at dividing payments in the medium
period, in order to maintain flexibility with cash flows. The use of financing is planned and instrumental to the realisation of investments.
Foreign exchange risk
There is no transaction, worthy of note, that can generate risks connected with currency fluctuations.
pag
100
Share capital management
Management of the company’s share capital is aimed at guaranteeing a sold credit rating and adequate levels of capital indicators
to support the industrial activities and investment plans.
The company, within the limits allowed by the contractual conditions of existing loans, can pay dividends to shareholders and issue
new shares. SNAI S.p.A. has analysed its capital using a debt/capital ratio, or comparing net debt to total capital plus net debt.
The group’s policy aims at keeping the ratio between 0.3 and 1.0.
This aim takes into account some equity and borrowing parameters used to calculate the covenants. For additional details see note
33 in the consolidated financial statements.
32. SIGNIFICANT ONE TIME EVENTS AND TRANSACTIONS
There are one time revenue and cost items in 2007.
Revenue
Compared to previous years a certain number of settlements have become recurring connected with former customer licensees who
in past used the company’s provider services. Most of the disputes have been submitted to arbitration boards appointed by the
parties by applying a specific contractual clause. The settlement of the arbitration hearings has been resulting in revenue in favour
of the company reflected in the income statement in manner that has become repetitive. Therefore a decision was made not to
consider this revenue as having a one time nature.
Costs
During 2007, as described above, non-recurring costs were incurred for one time transactions, since they have all the characteristics
of non-recurrence. These include costs incurred for:
- start-up of the debt renegotiation procedure (services for 536 thousand euro);
- for participation in the call for tenders for awarding of the concession to run and develop national totalisator numeric gaming,
so-called Superenalotto (services for 2,541 thousand euro, and financial charges for issue of sureties for 1,098 thousand euro).
The outcome of the call for tenders, published in January 2008, did not see the company classified in first place.
- Additional accruals to the provision for risks for 4,700 thousand euro to face the greater risk resulting from some contractual
relations, including transferred and disputes which have arisen as well as for the coverage of charges resulting during the liquidation
of some equity investments.
Non-recurring costs
Costs for services:
Costs for starting up debt renegotiation
Costs for participation in the so-called “SuperEnalotto” call for tenders
Total non-recurring cost for services and use of original works
536
2,451
2,987
0.15%
0.70%
0.85%
Other operating expenses:
4,700
15.52%
Financial charges:
Fees on sureties for participation in the so-called “SuperEnalotto” call for tenders
1,098
2.58%
33. POSITIONS OR SETTLEMENTS RESULTING FROM ATYPICAL AND/OR UNUSUAL
TRANSACTIONS
No atypical and/or unusual transactions occurred in 2007.
34. NET FINANCIAL POSITION
The table below shows the net financial position as required by Consob based on article 16 of the Financial Act and article 114,
paragraph 5 of Legislative Decree 58/98.
pag
101
SNAI S.p.A.
Net borrowing
Net Financial Position at 31.12.2007
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.
N.
O.
P.
Q.
Closing
31.12.2007
Opening
01.01.2007
Change
1
89,231
1
89,233
4
253,696
1
253,701
(3)
(164,465)
0
(164,468)
13
2,388
0
4,996
13
(2.608)
2,539
15,238
6
20,184
0
18,820
1,344
0
17
6,357
0
12,131
1.195
15.238
(11)
13,827
0
6,689
0
491
7,554
5,793
13,838
32,658
(76,759)
0
225,908
0
42
488
41,710
818
43,058
55,189
(204,869)
0
242,328
0
(42)
3
(34.156)
4.975
(29,220)
(22,531)
128,110
0
(16,420)
0
20,043
67,429
87,472
313,380
313,380
236,621
26,875
44,172
71,047
313,375
313,375
108,506
(6.832)
23.257
16,425
5
5
128,115
Cash
Other liquid assets
Securities held for sale
Liquid assets A+B+C
Current financial receivables:
due from parent company
due from companies subject to control
by the same parent company
asset management account
Banca Popolare Italiana warrant
Total current financial receivables
Current accounts payable due to banks
Current part of noncurrent borrowing
Other current financial payables:
due from parent company
for concession acquisition (Vendor loan
due to others
Total other current financial payables
Current financial borrowing F+G+H
Net current financial borrowing I-E-D
Noncurrent accounts payable due to banks
Bonds issued
Other noncurrent payables:
for concession acquisition (Vendor loan)
due to others
Total other noncurrent financial payables
Noncurrent financial borrowing L+M+N
Noncurrent net financial borrowing O - K
Net financial borrowing J+P
Compared to 31 December 2006 net financial borrowing increased by 128,115 thousand euro as the combined effect from
flows resulting from core operations and disbursements. The most significant items include:
- payment of 113,945 thousand euro to AAMS for awarding of 1,206 sports licences (342 shops and 864 corners) and 3,886
as well as the awarding of a concession for remote horse race gaming and one for sports, following the participation in the call
for tenders called by the Ministry of the Economy and Finance to apply the Bersani decree;
- payment for the procurement of goods and machines for setting up the new Bersani call for tenders points of sale for a total of
24,940 thousand euro;
- collection of 4,049 thousand euro related to the conclusion of the share capital increase;
- payment of 60,920 thousand euro for payables related to the acquisition of Concessions;
- repayment of the first loan tranche, tranche A, required by the Senior contract, for 13,000 thousand euro.
34.1 Financial commitments (Negative pledges)
See paragraph 29 “financial commitments” for a detailed description of the pledges and sureties issued by the company.
34.2 Covenants
As is customary with this type of loan, the existing Loan Contracts described above entail a series of obligations for the Company
which are substantially the same for both Senior and Junior Loan Contracts.
The company has made a commitment to the lenders to comply with a series of financial parameters mainly connected to the trend
of EBITDA on a consolidated level and total net borrowing of the company.
In accordance with the loans – “Senior Loan” and “Junior Loan” the Group is obligated to comply with the following financial
covenants related to Gruppo SNAI, which will be verified quarterly on a continuous year basis (compared to the twelve months),
starting from the six month period closed at 30 June 2006:
pag
102
Test Date
31
31
30
30
31
31
30
30
31
31
30
30
31
31
EBITDA
(in millions of euro)
Ratio between
Adjusted Net Total
Borrowing and EBITDA
Ratio between Net
Total Borrowing
and EBITDA
Fixed Charge
Coverage
61.1
61.9
62.7
63.5
64.3
65.0
65.6
66.3
66.9
67.5
68.0
68.5
69.0
69.3
5.3
5.1
4.9
4.6
4.4
4.2
4.0
3.8
3.5
3.3
3.2
3.0
2.8
2.6
3.9
3.6
3.7
3.5
3.4
3.1
3.2
3.0
2.9
2.7
2.7
2.5
2.4
2.3
0.7
0.6
0.6
0.8
0.8
0.7
0.7
0.8
0.8
0.7
0.7
0.7
0.7
0.2
December 2007
March 2008
June 2008
September 2008
December 2008
March 2009
June 2009
September 2009
December 2009
March 2010
June 2010
September 2010
December 2010
March 2011
EBITDA is defined in the loan contract and indicates the consolidated result before interest, taxes, depreciation and accruals and
all the extraordinary and non-recurring items.
The values at 31 December 2007 are still significantly influenced by the share capital increase transaction, which was completed
15 January 2007, participation on the call for tenders for awarding of the so-called Bersani points of sale and consequent cash
flow for opening of the new points of sale: the calculation prepared for application of the covenants, taking into account the previous
phenomena, does not deviate from the contractual parameters.
The uniform application of the covenants on values at 31 December 2007 is still significantly influenced by the share capital increase
transaction, which was completed 15 January 2007, and does not deviate from the contractual parameters.
It is important to note that 20 October 2006 a waiver was obtained allowing SNAI to obtain signatory credit for 140 million
euro, aimed at participation in the call for tenders for 16,300 new points of sale (gaming shops and corners) for horse racing
and sports bets, as well as a consequent increase in capital for a total of around 250 million euro, to use to finance obligations
consequent to this call for tenders.
The contractual novation made it possible to participate in the call for tenders which resulted in the awarding of a total of 5094
licences and guarantees sufficient flexibility for management of existing activities as well as those resulting from opportunities offered
to the group both by direct management of the new licences and expansion as a provider and supplier of services and machines,
with broad margins on the covenants still in existence.
An additional waiver was obtained by SNAI S.p.A. 25 September 2007 to allow the acquisition of signatory credit for an additional
305 million euro, aimed at participation in the call for tenders numeric games by totaliser (so-called superenalotto).
35. FINANCIAL INSTRUMENTS
Below is presented a comparison by category of the accounting value and fair value of the Company's financial instruments
Financial assets and liabilities
Cash
Receivables
Non current financial liabilities
31.12.07
Carrying amount
31.12.06
31.12.07
Fair value
31.12.06
89.232
51.355
20.185
13.838
18.820
313.379
253.700
48.697
6.357
43.058
12.131
313.374
89.232
51.355
20.185
13.838
18.820
313.379
253.700
48.697
6.357
43.058
12.131
313.374
pag
103
36. SUBSEQUENT EVENTS
For more information on the result of the call for tenders “Selection procedure for assignment of concession to run and develop
national totalisator numeric gaming” so-called Superenalotto see the specific paragraph of the directors’ report.
Other information
In compliance with the obligations introduced by Legislative Decree no. 6/2003 regarding corporate governance and specifically
with the introduction of articles 2497-2497 septies concerning “company management and coordination” SNAI S.p.A. has indicated
and made public, in the manner and form indicated by article 2497 bis of the Civil Code that the parent company SNAI Servizi
S.r.l. with registered office in Mantua – Viale Italia 19 – is the subject which exercises management and coordination activities
for Gruppo SNAI.
In order to comply with the accounting information obligations on the management and coordination activity indicated by article
2497 bis, paragraph 4, the data from the last approved financial statements of SNAI Servizi S.r.l., closed at 31 December 2006,
is shown in attachment 4 to these notes.
These explanatory notes are integrated with the information provided in the attachments:
Breakdown of Equity Investments with changes for the year
2.1) List of subsidiaries
2.2) List of associates and other equity investments
Breakdown of remuneration to directors, statutory auditors and general managers
Financial statements of parent company SNAI Servizi Srl
Information regarding real estate holdings of Gruppo SNAI
The attachments are an integral part of these notes and constitute additional information and description of the financial statement
items in question.
The Chairman
(Maurizio Ughi)
Porcari, 28 March 2008
The manager assigned with preparation of accounting and corporate documents, Luciano Garza, declares in accordance with
paragraph 2 article 154 bis of the Finance Act that the accounting information contained in this annual report corresponds to
document results, books of account and accounting entries.
pag
104
pag
105
6.708
644
101
496
46
6.065
1.932
228
1.000
26
50
175
723
1.331
9
513
78
HISTORIC
COST
0
0
0
REVALUA
TION
0
-5
-1
-513
-4
-5
-1.562
-101
-101
-1.461
-50
-175
-723
-1
-3
-1
-2
5.146
542
0
496
46
4.604
1.932
228
1.000
26
0
0
0
1.331
9
0
78
VALUES AT 31/12/2006
WRITEACQUISI
NOTES DOWNS
TION
0
0
0
-31
47
47
-78
-78
ACQUISI
DISPOSALS
TIONS or RECLASSI
FICATIONS
534
0
534
534
0
0
0
0
0
0
CHANGES FOR PERIOD
CHANGE IN
REVALUATIONS
SHARE
CAPITAL
+
0
0
0
0
0
0
WRITEDOWNS
+
5.649
0
496
46
47
589
5.060
1.932
228
1.000
26
0
0
0
1.331
9
534
0
NET VALUE
AT 31/12/07
19,50
19,50
2,44
15
100
100
100
100
100
84,46
70
30,70
30
26,67
25
% held
Notes:
(1) Portions proportional to the possession of losses in the year for the years 2001 to 2007 were accrued in the provision for equity investment measurement adjustments; if the percentage of accrued loss for the year exceeded the carrying amount of the equity investment an adequate accrual was made to the provision
for risks.
(2) On 27.7.2006 the Shareholders’ Meeting of Ippodromi San Siro S.p.A. (formerly Trenno S.p.A.) voted to establish the limited liability company "Sport e Spettacolo Ippico", which changed its company name to "Società Trenno S.r.l.", to which a company branch was conferred effective as of 20.9.2006
(3) On 28 June 2007 the liquidation of the company La Televisione Srl in liquidation was completed and on 23 July 2007 the company was cancelled from the business registry.
"(4) On 5 June 2007 the extraordinary shareholders’ meeting of the Società Gestione Capannelle S.p.A. shareholders of vote to cover the losses to 31 March 2007 which totalled 1,932,710.00 euro by: zeroing out the share capital totalling 1,890,800.00
euro; use of the legal reserve for 12,048.00 euro; use of the extraordinary reserve for 27,066.00 euro; payment by shareholders proportional to shares held by each one for 2,796.00 euro.
Moreover, the meeting voted to: re-establish the share capital at 1,956,000.00 euro; re-establish the extraordinary reserve at 41,204.00 euro; that the shareholders could exercise the option by 20 July 2007 and 5 August the subscribers could exercise the pre-emption right on any uncalled options; to consider
performed the share capital increase to the amount which would have been subscribed at that date and to change article 5 of the company articles of association regarding share capital; that the part of capital exceeding the payment at the time of subscribing the share capital of 2.5/10 must be paid by the shareholders:
35% by 31 October 2007 and 40% by 15 December 2007 "- as promptly performed. On 19 July 2007 SNAI S.p.A. subscribed 1,713,478 shares at 0.30 euro with simultaneous payment of 2.5/10 of the sum totalling 128,510.85 euro and 11,563.2 euro to cover the losses. Moreover, subsequently SNAI
S.p.A. subscribed and paid its uncalled portion totalling 2,090.23 euro. Therefore the equity investment of SNAI S.p.A. in Società Gestione Capannelle S.p.A. now totals 26.67%.
(5) On 7 December 2000 25% in Connext S.r.l. was acquired by acquiring the option rights from previous shareholders and later subscription and paying for increase in reserved share capital.
SNAI programmed a sales agreement for 10% of the equity investment in Connext S.r.l. therefore the 15% totalling 46 thousand euro was reclassified in other companies and the 10% was reclassified
in available-for-sale assets and measured at cost, as it was the lower value compared to the estimated fair value.
TOTAL
EQUITY INVESTMENTS IN OTHER COMPANIES:
- TIVU+ S.P.A. in liquidation
- TELEIPPICA S.R.L. (formerly SOGEST S.R.L.)
- LEXORFIN S.R.L.
- CONNEXT S.R.L. (formerly LINK S.r.l.)
TOTAL EQUITY INVESTMENTS IN OTHER COMPANIES:
EQUITY INVESTMENTS
EQUITY INVESTMENTS IN SUBSIDIARIES
AND ASSOCIATES:
- SOCIETA' TRENNO S.R.L. UNIPERSONALE
- IMMOBILIARE VALCARENGA S.R.L.
- FESTA S.R.L. UNIPERSONALE
- MAC° HORSE S.R.L. UNIPERSONALE
- RISTOMISTO S.R.L. in liquidation
- LA TELEVISIONE S.R.L. in liquidation
- TESEO S.R.L. in liquidation
- ALFEA S.P.A. SOC. PISANA CORSE CAVALLI
- SOLAR S.A.
- SOC. GESTIONE CAPANNELLE S.P.A.
- CONNEXT S.R.L. (già LINK)
TOTAL EQUITY INVESTMENTS IN SUBSIDIARIES
AND ASSOCIATES:
Values in thousands of euro
SNAI S.p.A.
Attachment 1
Equity investments
pag
38,24
1.487,75
-136,45
-487,27
-79,21
1.032,70
38,24
1.487,75
-136,45
-696,10
-79,21
823,87
50,00
1,00
1,00
1,00
0,52
1.932,23
NOM. VALUE
OF SHARES/
HOLDINGS
Euro
4.091,11
50,00
1.032,00
25,88
1.000,00
51,00
1.932,23
SHARE
CAPITAL
6) RISTOMISTO S.r.l. in liquidation
5) TESEO S.r.l. in liquidation
4) MAC HORSE S.r.l. unipersonale
3) FESTA S.r.l.
PA
RM
LU
LU
MI
MI
98.000
1
Number
POSSESSED
1,00
722,40
25.883
1.000.000
REGISTERED
OFFICE
2) IMMOBILIARE VALCARENGA Srl
1) SOCIETA' TRENNO Srl
EQUITY INVESTMENT
OF SHARES/HOLDINGS
3.959,37
50,00
723,04
25,88
1.000,00
228,22
1.932,23
-773
-50,00
-723,04
VALUE
ADJUSTMENT
Euro/000
Euro/000
Notes:
(*)The financial statements of Società Trenno Srl have been prepared with the IFRS, all the others have been prepared with Italian accounting standards.
-1,00 The carrying amount for profit (loss) for the year and shareholders’ equity refer to the situation prepared by the liquidator at 31/12/2006.
209,64
209,64
PROFIT (LOSS)
PRO-QUOTA
AT 31/12/2007 (*)PROFIT (LOSS)
Euro/000 Euro/000
List of subsidiaries
SNAI S.p.A.
Attachment 2.1
100,00
70,00
100,00
100,00
100,00
100,00
100,00
70,00
100,00
100,00
100,00
100,00
2.749,66
-748,52
-2.044,51
200,84
2.969,45
286,95
2.085,45
SHAREHOLDERS’
EQUITY
AT 31.12.07
DIRECT INDIRECT TOTAL
%
%
%
3.363,01
-748,52
-1.431,16
200,84
2.969,45
286,95
2.085,45
1
1
PRO-QUOTA
SHAREHOLDERS’ Notes
Euro/000
Euro/000
106
199,81
2.521,25
4,11
12,12
-35,18
163,06
-0,54
2.864,63
2006
1.024,68
2006
12.929,47
2007
27,43
2006
40,41
1st QUARTER 2007 -133,88
2007
531,13
2007
-22,13
14.397,11
pag
1,00
1,00
1,00
2,00
0,29
1,00
1,00
2.540,00
520,00
81,60
31,00
1.890,80
996,30
1.500,00
NOM. VALUE
OF SHARES/ SHARE CAPITAL
HOLDINGS
Euro/000
Euro/000
REGISTERED
OFFICE
2.543,24
496,16
101,40
46,48
9,30
513,00
1.331,06
45,85
ACQUISITION
VALUE
Euro/000
-614,40
-513,00
-101,40
PROVISION FOR
ADJUSTMENT
19,50%
19,50%
15,00%
30,00%
26,28%
30,70%
2,44%
DIRECT INDIRECT
Euro/000
%
%
19,50%
19,50%
15,00%
30,00%
26,28%
30,70%
2,44%
TOTAL
%
6.766,48
4.491,00
-4.821,96
96,04
71,41
-3,00
5.154,21
1.778,78
1.596,25
875,75
-940,28
14,41
21,42
-0,79
1.582,34
43,40
3-A
4-A
A
1
2
PRO-QUOTA
SHAREHOLDERS’ EQUITY
FINANCIAL STATEMENTS SHAREHOLDERS
EQUITY (*) NOTES
(**)
Euro/000’
Euro/000
107
(A)The Equity Investment, already held indirectly at 31/12/2005 through the merged company Ippodromi San Siro SpA (formerly Trenno S.p.A.) was acquired directly after the merger
(4)30.70% of share capital is held, the holding was reached following distribution of uncalled shares, to complete the share capital increase transaction, voted by the Extraordinary Shareholders’ Meeting of 21/11/1990
(3)The figures refer to the most recent equity situation closed at 31/03/07 and approved by the extraordinary shareholders’ meeting on 5 June 2007 which voted to cover losses up to 31 March for 1,933 thousand
euro and re-establish the share capital
in available-for-sale assets and measured at cost, as it was the lower value compared to the estimated fair value.
SNAI programmed the sale of 10% of the equity investment in Connext S.r.l. therefore the 15% totalling 46 thousand euro was reclassified in other companies and the 10% was reclassified
-2 On 7 December 2000 25% in Connext Srl was acquired by acquiring the option rights from previous shareholders and later subscription and payment for increase in reserved share capital.
-1 As of 30 June 2004 the paid in share capital totalled ¤50,000. The company was acquired by others in 2000 and during 2004 80.50% of its nominal share capital was transferred to the parent company SNAI
Servizi srl
In 2005 the shareholders’ meeting voted to increase the share capital to ¤2,540 thousand. SNAI SpA subscribed and paid its portion totalling 19.5%.
(**)The financial statements of the associates and others have been prepared according to Italian accounting standards
495.300
101.400
20.400
4.650
1.713.478
305.840
36.652,00
POSSESSED
Number
OF SHARES/HOLDINGS
TELEIPPICA SRL (formerly Sogest)
PORCARI
TIVU+ S.P.A. in liquidation
ROME
CONNEXT SRL (formerly Link srl)
PORCARI
SOLAR S.A.
LUXEMBOURG
SOCIETA' GESTIONE CAPANNELLE SpA
ROME
ALFEA S.p.A. - SOC.PISANA PER LE CORSE CAVALLI
PISA
LEXORFIN S.r.l.
ROME
EQUITY INVESTMENTS
(*)The pro-quota shareholders’ equity approximates the measurement with the equity method.
NOTES:
PRO-QUOTA
PROFIT (LOSS)
Euro/000
PROFIT (LOSS)
REFERENCE 2006 FINANCIAL
STATEMENTS
YEAR
31/12/2006
Euro/000
List of associates and other equity investments
SNAI S.p.A.
Attachment 2.2
OFFICE
pag
108
from
from
from
from
from
from
from
from
from
from
from
from
from
01.01.07
01.01.07
01.01.07
01.01.07
01.01.07
01.01.07
01.01.07
01.01.07
01.01.07
01.01.07
01.01.07
01.01.07
01.01.07
to
to
to
to
to
to
to
to
to
to
to
to
to
216.000,00
66.000,00
42.000,00
42.000,00
42.000,00
42.000,00
42.000,00
42.000,00
66.000,00
127.448,15
42.969,68
31.225,37
31.225,37
832.868,57
Totals
REMUNERATION
FOR OFFICE
31.12.07
31.12.07
31.12.07
31.12.07
31.12.07
31.12.07
31.12.07
31.12.07
31.12.07
31.12.07
31.12.07
31.12.07
31.12.07
TERM IN
OFFICE
DESCRIPTION
- The statutory auditors remain in office until approval of the financial statements at 31.12.2007
- The directors remain in office until approval of the financial statements at 31.12.2007
** Members of Internal Audit Committee
(A) Remuneration due for offices in subsidiaries
Ughi, Maurizio
Chairman
Ginestra, Francesco
Vice Chairman
Losco, Pasquale
Director
Ciuffi, Francesco
Director
Corradini, Claudio
Director
Lucchi, Alberto*
Director
Mecacci, Alessandro
Director
Rossi, Paolo*
Director
Siano, Andrea*
Director
Garza, Luciano
Managing Director
Lerro, FrancescoChairman of Board of Statutory Auditors
Ferrigno, Lorenzo
Standing Auditor
Parlotti, Alessandro
Standing Auditor
FULL
NAME
SUBJECT
(Values expressed in euro)
SNAI S.p.A. and SUBSIDIARIES
REMUNERATION FOR DIRECTORS, STATUTORY AUDITORS AND MANAGING DIRECTORS
COMMUNICATION IN ACCORDANCE WITH CONSOB RESOLUTION NO 11971 OF 14.05.1999 – ANNEX 3C
WITH STATEMENT 1 (O.G. ORDINARY SUPPLEMENTS 28.05.1999 – no. 123)
0,00
FRINGE
BENEFITS
0,00
BONUSES AND
OTHER INCENTIVES
257.080,00
19.080,00
18.000,00
220.000,00
OTHER
REMUNERATION (A)
Key figures of parent company financial statements
S N A I S E R V I Z I S.R.L.
Registered office: Viale Italia 19 - Mantua
Operative office: Via Boccherini, 39 Porcari (LU)
Share capital ¤ 113,394,897.65 entirely paid in
Tax ID no. 01356590461 – VAT no. 01782510208
Mantua business registry 01356590461
Mantua business information index no. 181350
Balance Sheet at 31 December 2006
(in euro)
ASSETS
(A) RECEIVABLES DUE FROM SHAREHOLDERS FOR PAYMENTS
(B) NONCURRENT ASSETS:
I
INTANGIBLE ASSETS:
II
PROPERTY, PLANT AND EQUIPMENT:
III
FINANCIAL ASSETS:
TOTAL NONCURRENT ASSETS (B)
(C) CURRENT ASSETS:
II
RECEIVABLES:
III
FINANCIAL ASSETS NOT CLASSIFIED AS NONCURRENT ASSETS
IV
CASH AND CASH EQUIVALENTS
TOTAL CURRENT ASSETS (C)
D) PREPAID EXPENSES AND ACCRUED INCOME
TOTAL ASSETS
Balance Sheet at 31 December 2006
(in euro)
LIABILITIES
(A) SHAREHOLDERS’ EQUITY
I
SHARE CAPITAL
II
SHARE PREMIUM RESERVE
III
REVALUATION RESERVES
IV
LEGAL RESERVE
V
STATUTORY RESERVES
VI
RESERVE FOR TREASURY STOCK IN PORTFOLIO
VII
OTHER RESERVES
VIII
RETAINED EARNINGS (LOSSES C/F)
IX
PROFIT (LOSS) FOR YEAR
TOTAL SHAREHOLDERS' EQUITY (A)
(B) PROVISIONS FOR RISKS AND CHARGES
(C) TERMINATION BENEFITS FOR EMPLOYEES
(D) ACCOUNTS PAYABLE
(E) ACCRUED EXPENSES AND DEFERRED INCOME
TOTAL LIABILITIES
MEMORANDUM ACCOUNTS
Guarantees and sureties received or granted
Income Statement closed at 31 December 2006
(in euro)
(A) OPERATING REVENUE
(B) OPERATING COSTS
7)
for services
8)
for leased assets
9)
for personnel:
10)
depreciation, amortisation and write-downs
12)
accruals for risks
14)
other operating costs
TOTAL OPERATING COSTS (B)
DIFFERENCE BETWEEN TOTAL OPERATING REVENUE AND OPERATING COSTS (A-B)
(C) FINANCIAL INCOME AND CHARGES
(D) VALUE ADJUSTMENTS TO FINANCIAL ASSETS
(E) EXTRAORDINARY INCOME AND CHARGES
PRE-TAX EARNINGS (A-B+C+D+E)
22)Income taxes for the year, current, deferred and prepaid
23)PROFIT (LOSS) FOR YEAR
pag
109
31/12/2006
0
31/12/2005
9.928
2.443.214
35.855
176.329.066
178.808.135
1.690
66.603
48.403.010
48.471.303
2.063.805
0
15.669.377
17.733.182
54.624
196.595.941
2.221.257
38.038
781.255
3.040.550
964
51.522.745
31/12/2006
31/12/2005
38.394.898
536
0
1.274.687
0
0
32.658.297
0
675.902
73.004.320
1.688.115
120.124
121.590.822
192.560
196.595.941
38.394.898
536
0
1.274.687
0
0
2.317.089
0
-1.175.422
40.811.788
1.216.151
101.573
9.355.561
37.672
51.522.745
30.857.763
54.396.705
2.006
599.827
2.005
688.989
1.178.841
123.103
383.074
497.112
480.000
306.842
2.968.972
1.014.631
133.641
424.961
59.378
0
292.063
1.924.674
-2.369.145
-86.491
0
3.224.576
768.940
93.038
675.902
-1.235.685
196.054
10.296
-146.087
-1.175.422
0
-1.175.422
SNAI S.p.A.
Attachment 5
(values in euro)
Amount
Possibility
of use (1)
Available
portion
Breakdown of uses in three previous years
to cover losses
Share capital
for other reasons
60.748.992
Capital reserves:
Reserve as per Law 72 19/03/83
Reserve for share premium
Reserve as per Law 413 30/12/91
IFRS profit -632.571
Merger surplus
757.115
211.318.731
-
A, B, C
A, B
757.115
203.223.541
28.071.658
A, B
28.071.658
1.267.897
22.449.411
B
A, B, C
22.449.411
Profit reserves:
Legal reserve
Extraordinary Reserve
Reserve unavailable for
SE equity investment measurement
-
Total
Non-distributable portion (3)
Remaining distributable portion
254.501.725
233.455.146
21.046.579
A: to increase capital
B: to cover losses
C: for distribution to shareholders
Notes:
1) Unless other constraints exist in statutory provisions, to disclose where existing.
2) Used to cover losses for 2006
3) Includes the non-distributable portion to cover remaining value of development costs
pag
110
141.520
2
1.849.980
2
Information regarding real estate holdings of Gruppo Snai
REAL ESTATE HOLDINGS AT 31 DECEMBER 2006
AREA
RACE
TRACKS
mq.
TRACK
STANDS
mq.*
HORSE
BOXES
mq.
OFFICES DWELLINGS
mq.*
FIELDS
AND PATHS
mq.*
mq.
OTHER
USES
mq.
TOTAL
mq.
SNAI S.p.A.
Milano
- Via Ippodromo 100
Milano
- Via Ippodromo 41
Milano
- Via Ippodromo 51
Milano
- Via Ippodromo 134
Milano
- Centro Ippico Cottica
Milano
- Pista allenamento Trenno
Milano
- Pista allenamento maura
Milano
- Via Rospigliosi 43
Milano
- V.le Caprilli 30 (galoppo)
Porcari (LU)
- Via Puccini, 2/F
Milano
- V.le Caprilli 30 e
Via Ippodromo 67 (galoppo)
Milano
- Via dei Piccolomini 2 (trotto)
Montecatini Terme
- Ippodromo Trotto
2.238
10.000
10.000
780
230
4.026
4.806
1.215
614
6.455
7.670
6.180
2.150
53.820
60.000
5.000
2.400
53.350
270
58.620
410.500
410.500
250.000
250.000
6.250
14.574
14.539
130
20.919
1.439
16.013
260
2.100
1.560
3.920
1.680
10.537
160
575.434
551.206
8.561
3.290
121.270
17.250
5.000
936
2.000
4.295
300
130.865
92.564
1.620
7.400
750
200
53.217
961
154.142
1.702.889
IMMOBILIARE VALCARENGA S.r.l.
Milano
- Via Ippodromo 165
1.420
1.465
25.655
25
27.100
27.100
FESTA S.r.l.
Porcari (LU)
- Via Lucia, 7
3.440
1.440.114
28.870
36.535
4.184
10.739
237.994
6.846 1.733.429
*The areas reported in this column are different than the round floor and are not added to the total in the eighth column
pag
111
3.440
Certification of the financial statements in accordance with article 81 – ter of Consob Regulation no. 11971 of 14 May 1999
and following modifications and integrations
1. The undersigned Maurizio Ughi as Chairman and Luciano Garza as manager in charge of preparing the accounting and
corporate documents of SNAI S.p.A. hereby certify, taking into account the provisions of article 154-bis, paragraphs 3 and 4 of
Legislative Decree no. 58 of 24 February 1998:
• the adequacy in relation to the enterprise characteristics and
• effective application
of the administrative and accounting procedures to prepare the financial statements at 31 December 2007.
2. To this end, it is important to note that Gruppo SNAI has started a rationalisation, integration and formalisation activity of the
administrative-accounting procedures and consolidated practices, which compose all of the processes involved in preparing the
financial statements based on methods generally recognised on an international level, in particular using the “Internal Control –
Integrated Framework” models issued by Committee of Sponsoring Organizations of the Treadway Commission (so-called “CoSO
report”) and “Control Objectives for Information and related Technology (so-called Cobit)” as a reference which represent the
standards for the internal audit system generally accepted on an international level.
3. Moreover, we certify that the financial statements:
a. correspond to the books of account and accounting records;
b. are prepared in compliance with the International Financial Reporting Standard adopted by the European Union as well as
the provisions issued to implement article 9 of Legislative Decree no 38/2005 (transposing European Union Regulation no. 1606
of 19 July 2002), and to the best of our knowledge it is suitable for providing a true and correct representation of the equity,
economic and financial situation of the issuing company and all of the companies included in the consolidation.
This certification is also prepared in accordance with article 154-bis, paragraph 2 of Legislative Decree no. 58 of 24 February
1998.
Porcari (LU), 28 March 2008
The Manager in charge
The Chairman
of preparing
accounting documents
(Maurizio Ughi)
pag
(Luciano Garza)
112
Financial statements of
subsidiaries and associates
bologna - piazza s.stefano
Financial statements of subsidiaries and associates
TRENNO S.R.L.
Registered office: Via Ippodromo, 100 - 20151 Milan – Tax ID and VAT number 02044330468 – Milan Business Information
Index no. 1820350 Share Capital 1,932,230.00 entirely paid in – Milan Business Registry no. 02044330468
Balance prepared in accordance to IAS/IFRS guidelines
Balance sheet at 31.12.07
(in euro)
ASSETS
31/12/2007
31/12/2006
3.039.432
1.119.787
0
4.159.219
2.319.912
152.789
0
2.472.701
71.135
0
142.968
142.968
Noncurrent assets
Leased property, plant and equipment
Asset with finance lease contract
Goodwill
71.135
Prepaid taxes
0
0
0
156.762
101.993
4.489.109
0
0
0
145.000
54.526
135.277
2.950.472
Current assets
Inventories
Accounts receivable
Other assets
Available-for-sale assets
215.505
7.638.871
276.498
0
2.958.308
0
11.089.182
223.098
3.295.258
143.839
0
8.053.852
0
11.716.047
TOTAL ASSETS
15.578.291
14.666.519
31/12/2007
31/12/2006
1.932.230
-56.420
209.641
2.085.451
1.932.230
8
-56.428
1.875.810
Deferred taxes
Noncurrent various accounts payable and other liabilities
3.566.097
0
179.544
110.000
26.681
3.882.322
3.956.892
0
142.107
0
27.632
4.126.631
Current liabilities
Accounts Payable
Other liabilities
4.796.566
4.796.030
17.922
0
17.922
9.610.518
15.578.291
4.814.956
2.416.643
1.432.479
0
1.432.479
8.664.078
14.666.519
Share capital
Reserves
Total Shareholders' Equity
pag
115
Trenno S.r.l.
Income Statement at 31 December 2007
(valori in euro)
2.007
Increase of internally generated fixed assets
Personnel costs
Other operating expenses
Earnings before depreciation, write-downs, financial income/expense and taxes
Depreciation and amortization
Value reversals (Write-downs) on noncurrent assets
Capital gains (losses) on sale of noncurrent assets
Operating Income
Financial income
Financial charges
Total financial income and charges
Net gain (loss) on assets disposed of/available-for-sale
PRE-TAX EARNINGS
Income taxes
25.148.581
530.162
0
0
-399.584
-13.893.497
-8.235.268
-1.111.342
2.039.052
-953.495
987
21.333
1.107.877
0
80.427
-270.598
(190.171)
0
917.706
-708.065
209.641
C.E.O.
Claudio Corradini
pag
116
2.006
6.715.699
284.671
0
0
-105.540
-3.924.033
-2.255.605
-219.693
495.499
-201.992
1.943
10
295.460
0
14.206
- 43.262
(29.056)
0
266.404
-322.832
(56.428)
Registered office: via Boccherini, 39 - 55016 Porcari (LU) – Tax ID and VAT number 01755450465 – Lucca Business Information
Index no. 169111
Share Capital 1,000,000.00 entirely paid in – Lucca Business Registry no. 01755450465 (6141/2000)
Balance Sheet 31 December 2007
(in euro)
ASSETS
31/12/2007
(A)
RECEIVABLES DUE FROM SHAREHOLDERS FOR PAYMENTS
(B)
NONCURRENT ASSETS
I
II
III
INTANGIBLE ASSETS:
1)
start-up and expansion costs
3)
Industrial patent rights and licences to use original works
4)
concessions, license, trademarks and similar rights
5)
goodwill;
6)
current assets and advances
7)
other
TOTAL
1)
land and buildings
2)
plant and machinery
3)
fixtures and equipment
4)
other assets
TOTAL
FINANCIAL ASSETS:
2)
receivables:
payable within and beyond the following year
d) due from others
TOTAL FINANCIAL ASSETS
(C)
CURRENT ASSETS:
I
INVENTORIES:
II
RECEIVABLES:
payable within the following year
1)
due from customers
4)
due from parent companies
4bis)
tax assets
4ter)
prepaid taxes
5)
to others
payable beyond the following year
4ter)
prepaid taxes
TOTAL RECEIVABLES
III
FINANCIAL ASSETS NOT CLASSIFIED AS NON CURRENT ASSETS
IV
CASH AND CASH EQUIVALENTS
1)
bank and postal deposits
3)
cash on hand
TOTAL
TOTAL ASSETS
pag
117
31/12/2006
0
0
0
24.631
92.311
61.975
0
185.312
364.229
0
70.706
8.843
92.962
0
185.685
358.196
51.646
19.148
28.288
352.704
451.786
51.646
1.567
37.689
225.348
316.250
73.563
73.563
21.069
21.069
889.578
695.515
0
0
468.829
92.895
47.827
905.451
2.749.355
878.515
910.861
15.071
391.663
2.288.187
12.435
4.276.792
0
10.357
4.494.654
0
1.158.196
2.804
1.161.000
1.613.983
3.064
1.617.047
5.437.792
6.111.701
34.001
13.818
6.361.371
6.821.034
(in euro)
LIABILITIES
A)
I
SHARE CAPITAL
II
SHARE PREMIUM RESERVE
III
REVALUATION RESERVES
IV
LEGAL RESERVE
V
STATUTORY RESERVES
VI
RESERVE FOR TREASURY STOCK IN PORTFOLIO
VII
OTHER RESERVES
1) reserve to cover current losses
2) translation reserve
TOTAL OTHER RESERVES
VIII RETAINED EARNINGS (LOSSES C/F)
IX
6) Advance payments
7) due to suppliers
11) due to parent companies
12) tax liabilities
13) due to social security institutions
14) other payables
12) tax liabilities
14) other payables
TOTAL ACCOUNTS PAYABLES
TOTAL LIABILITIES
MEMORANDUM ACCOUNTS
AAMS sureties
pag
118
31/12/2007
31/12/2006
1.000.000
0
0
47.099
0
0
1.000.000
0
0
21.153
0
0
0
0
0
434.596
1.487.754
2.969.449
0
1
1
-58.385
518.926
1.481.695
0
0
309.754
336.608
0
646.970
553.702
313.210
202.591
1.257.975
165
678.708
1.974.802
73.627
150.458
1.981.345
0
107.720
3.082.168
0
143.626
5.002.731
0
0
6.361.371
6.821.034
110.527
423.930
110.527
423.930
(in euro)
(A)
OPERATING REVENUE
2.007
1)
revenue from sales and services
7.042.646
other
5)
other revenue and proceeds, with separate indication grants
9.168
TOTAL OPERATING REVENUE (A)
7.051.814
(B)
OPERATING COSTS
6)
for raw and subsidiary materials, consumables and goods
6.579
7)
for services
2.844.307
8)
for leased assets
147.729
9)
for personnel:
a) salaries and wages
1.517.859
b) social security
396.453
c) termination benefits
114.094
e) other costs
797
TOTAL PERSONNEL EXPENSES
2.029.203
10)
Depreciation, amortisation and write-downs
a) amortisation of intangible assets
149.250
b) depreciation of property, plant and equipment
103.196
d) write-down of receivables in current
assets and liquid assets
243.260
TOTAL DEPRECIATION, AMORTISATION AND WRITE-DOWNS
495.706
14)
other operating expenses
153.050
5.676.574
DIFFERENCE BETWEEN TOTAL OPERATING REVENUE AND
OPERATING COSTS (A-B)
1.375.240
(C)
FINANCIAL INCOME AND CHARGES
16)
other financial income:
d) income other than above
3) from parent company
66.735
4) from others
14.263
total
80.998
TOTAL
80.998
17)
interest and other financial charges from:
parent companies
83.991
from others
176.545
TOTAL
260.536
TOTAL C (15+16-17+ - 17 bis)
-179.538
(E)
EXTRAORDINARY INCOME AND CHARGES
20)
Income with separate indication of capital gains from disposals,
where revenue cannot be entered under no. 5
other extraordinary income
278
TOTAL EXTRAORDINARY INCOME
278
21)
expenses with separate indication of capital losses from disposals,
whose accounting effects cannot be entered under no. 14 and taxes
related to previous years:
taxes related to previous years
9.287
TOTAL EXTRAORDINARY EXPENSES
9.287
TOTAL OF EXTRAORDINARY ITEMS (20-21)
-9.009
EARNINGS BEFORE TAXES (A-B+C+D+E)
1.186.693
22)
Current, deferred and prepaid income taxes
a)
Current taxes
-214.805
b)
Deferred and prepaid taxes
852.644
c)
use of provision for deferred/prepaid taxes
-336.778
23)
1.487.754
The Chairman
of the Board of Directors – Loris Morassi
pag
119
2.006
6.121.127
19.660
6.140.787
37.774
3.019.448
66.439
1.097.120
296.147
85.326
2.680
1.481.273
118.307
90.309
104.781
313.397
179.777
5.098.108
1.042.679
88.860
7.414
96.274
96.274
20.015
122.720
142.735
-46.461
0
0
0
0
0
996.218
-143.444
113.234
-447.082
518.926
MAC HORSE S.R.L. unipersonale
Registered office: via Boccherini, 39 - 55016 Porcari (LU) – Tax ID and VAT number 04515450825 – Lucca Business Information
Index no. 184876
Share Capital 25,882.84 entirely paid in – Lucca Business Registry no. 04515450825
(in thousands euro)
ASSETS
(A)
(B)
31-12-2007
0
NONCURRENT ASSETS
INTANGIBLE ASSETS:
7) other
TOTAL
II PROPERTY, PLANT AND EQUIPMENT:
2) plant and machinery
4) other assets
TOTAL
III FINANCIAL ASSETS:
2) receivables:
d) due from others
31-12-2006
0
I
(C) CURRENT ASSETS:
I INVENTORIES:
II RECEIVABLES:
1) due from customers
2) due from subsidiaries
3) due from associates
4) due from parent companies
4bis) tax assets
4ter) prepaid taxes
5) to others
TOTAL RECEIVABLES
III FINANCIAL ASSETS NOT CLASSIFIED AS NON CURRENT ASSETS
IV CASH AND CASH EQUIVALENTS
1) bank and postal deposits
3) cash on hand
TOTAL
TOTAL ASSETS
pag
120
3.850
3.850
5.154
5.154
0
10.876
10.876
204
9.578
9.782
17.968
17.916
17.968
17.916
32.694
32.852
0
0
352.637
19.731
0
23.340
395.708
0
381.382
17.526
0
25.103
424.011
0
14.075
12
14.087
13.969
12
13.981
409.795
437.992
1.768
1.877
444.257
472.721
MAC HORSE S.r.l.
Balance sheet 31 december 2007
(in thousands euro)
LIABILITIES
(A)
31/12/2007
I SHARE CAPITAL
II SHARE PREMIUM RESERVE
III REVALUATION RESERVES
IV LEGAL RESERVE
V STATUTORY RESERVES
VI RESERVE FOR TREASURY STOCK IN PORTFOLIO
VII OTHER RESERVES
1) extraordinary reserve
VIIIRETAINED EARNINGS (LOSSES C/F)
IX PROFIT (LOSS) FOR YEAR
(B)
PROVISIONS FOR RISKS AND CHARGES
(C)
TERMINATION BENEFITS FOR EMPLOYEES
ACCOUNTS PAYABLE
5) due to other lenders
7) due to suppliers
12) tax liabilities
13) due to social security institutions
14) other payables
31/12/2006
25.883
0
0
9.631
0
0
25.883
0
0
9.631
0
0
10.638
1
10.639
18.235
136.452
0
-1
-1
18.235
150.638
200.840
204.386
0
0
76.712
68.840
0
37.908
77.547
29.766
12.614
8.808
166.643
15.207
60.379
84.787
24.820
10.838
3.464
199.495
63
0
444.258
472.721
0
0
(D)
(E)
ACCRUED EXPENSES AND DEFERRED INCOME
TOTAL LIABILITIES
MEMORANDUM ACCOUNTS
pag
121
(in thousands euro)
2007
(A)
2006
OPERATING REVENUE
1) revenue from sales and services
5) other revenue and proceeds, with separate indication
grants
(B) OPERATING COSTS
7) for services
8) for leased assets
9) for personnel:
a) salaries and wages
b) social security
c) termination benefits
e) other costs
TOTAL PERSONNEL EXPENSES
10)
d) write-down of receivables in current assets and liquid assets
14)other operating expenses
(C)
16)
598.510
2.451
623.551
1
600.961
623.552
109.409
26.709
118.211
25.461
176.928
51.816
10.193
3.685
242.622
163.706
47.264
12.945
1.079
224.994
1.303
4.810
1.763
7.876
12.445
399.061
1.303
4.666
1.907
7.876
13.531
390.073
201.900
233.479
33.354
69
33.423
33.423
23.098
57
23.155
23.155
1.135
1.135
1.518
1.518
0
32.288
0
21.637
0
0
from securities entered in noncurrent assets not classified as equity investments
from securities entered in current assets not classified as equity investments
1) from parent companies
4) from others
total
TOTAL
17)
from others
TOTAL
17bis) gains and loss on foreign exchange
TOTAL
TOTAL C (15+16-17+ - 17 bis)
(D) VALUE ADJUSTMENT TO FINANCIAL ASSETS
18)
revaluations
19)
write-downs
TOTAL OF ADJUSTMENTS D (18-19)
pag
122
(in thousands euro)
20)
rounding in euro
21)
rounding in euro
contingent liabilities
22)
a) Current taxes
b) Deferred and prepaid taxes
c) use of provision for deferred/prepaid taxes
23)
C.E.O.
Stefano Marzullo
pag
123
0
0
0
0
0
523
523
1
0
1
-523
-1
233.665
255.115
-97.213
0
0
136.452
-104.477
0
0
150.638
Registered office: via Ippodromo, 100 - 20151 Milan - Tax ID and VAT no. 03377490150 – Milan Business Information Index
no. 0476852 Share Capital 51,000.00 entirely paid in – Milan Business Registry no. 03377490150
(in euro)
ASSETS
(A)
(B)
NONCURRENT ASSETS
II
III
1) land and buildings
2) plant and machinery
TOTAL
FINANCIAL ASSETS:
1) equity investments in
a) subsidiaries
TOTAL EQUITY INVESTMENTS
2) receivables:
d) due from others
(C)
CURRENT ASSETS:
I
INVENTORIES:
II
RECEIVABLES:
2) due from subsidiaries
3) due from associates
4) due from parent companies
4bis) tax assets
5)
to others
5) to others
TOTAL RECEIVABLES
III
FINANCIAL ASSETS NOT CLASSIFIED AS NON CURRENT ASSETS
D)
PREPAID EXPENSES AND ACCRUED INCOME
TOTAL ASSETS
pag
124
31/12/2007
31/12/2006
0
0
177.971
8.334
186.305
185.905
10.921
196.826
0
0
11
11
11
11
186.316
196.837
0
0
14.341
0
0
138.678
6.349
20.554
20.866
107.097
15.458
12.063
179.922
0
0
155.484
0
0
179.922
155.484
0
0
366.238
352.321
(in euro)
LIABILITIES
(A)
(B)
I SHARE CAPITAL
1) legal reserve no. 72 of 19/3/83
2) legal reserve no. 413 of 30.12.91
TOTAL REVALUATION RESERVES
IV LEGAL RESERVE
VII OTHER RESERVES
1) extraordinary reserve
3) other
TOTAL PROVISIONS FOR RISKS AND CHARGES (B)
(C)
(D)
ACCOUNTS PAYABLE
7)
due to suppliers
12) tax liabilities
14) other payables
(E)
ACCRUED EXPENSES AND DEFERRED INCOME
TOTAL LIABILITIES
MEMORANDUM ACCOUNTS
pag
125
31-12-2007
31-12-2006
51.000
51.000
23.795
95.549
119.344
10.280
23.795
95.549
119.345
10.281V
0
0
7.360
1
7.361
60.731
38.239
286.955
7.360
7.360
51.347
43.684
283.016
15.501
15.501
15.501
15.501
0
0
33.346
25.167
4.406
863
33.192
18.378
1.390
843
63.782
53.804
0
0
366.238
352.321
0
0
(in euro)
2.007
2.006
92.776
91.236
4.803
1.912
97.579
93.149
22.794
33.014
10.521
10.952
74
10.595
10.938
106
11.058
11.221
44.327
55.294
53.252
37.855
0
0
11.793
0
11.793
4.771
4.771
20
20
22
22
11.773
4.749
0
20.412
20.412
0
20.412
65.025
63.016
-26.786
38.239
-19.332
43.684
((A)
OPERATING REVENUE
1) revenue from sales and services
5) other revenue and proceeds, with separate indication
grants
(B)
(C)
OPERATING COSTS
7) for services
10) Depreciation, amortisation and write-downs
14) other operating expenses
15) revenue from equity investments:
TOTAL
16) other financial income:
income other than above
1) from parent companies
2) from subsidiaries
TOTAL
17) interest and other financial charges from:
from others
TOTAL
TOTAL C (15+16-17+ - 17 bis)
(E)
20) Income with separate indication of capital gains from disposals,
a.1)extraordinary income
21) expenses with separate indication of capital losses from disposals,
22) Current, deferred and prepaid income taxes
a) Current taxes
23) PROFIT (LOSS) FOR YEAR
C.E.O.
Luciano Garza
pag
126
(in euro)
ASSETS
(A)
31-12-2006
0
31/12/2005
0
0
0
1.000
1.000
8.000
8.000
30.260
43.288
33.985
107.533
0
135.991
43.846
17.749
197.586
0
8.187
1.289
9.476
118.009
197
1.164
1.361
206.947
0
0
118.009
206.947
31-12-2006
31/12/2005
50.000
93.526
-812.829
-79.212
-748.515
50.000
93.524
-514.048
-298.780
-669.304
3) other
0
0
53.194
53.194
0
0
759.774
15
106.735
866.524
716.747
15
105.897
398
823.057
0
0
118.009
206.947
0
0
(B)
NONCURRENT ASSETS
(C)
CURRENT ASSETS:
I
INVENTORIES:
4) finished products and goods
TOTAL INVENTORIES
II RECEIVABLES:
4bis) tax assets
5) to others
TOTAL RECEIVABLES
1) bank and postal deposits
3) cash on hand
TOTAL
TOTAL ASSETS
LIABILITIES
(A) SHAREHOLDERS’ EQUITY
I SHARE CAPITAL
VII OTHER RESERVES
3) due to shareholders for loans
5) due to other lenders
7) due to suppliers
12)tax liabilities
TOTAL LIABILITIES
MEMORANDUM ACCOUNTS
pag
127
(in euro)
31-12-2006
31/12/2005
1.000
0
1.000
0
0
0
1.252
156.459
156.459
100.000
21.380
256.459
-20.380
-256.459
2
60.428
1
50.095
-60.426
-50.094
0
0
9.112
9.112
14.285
14.285
7.518
7.518
6.512
6.512
1.594
7.773
-79.212
-298.780
79.212
-298.780
(A)
OPERATING REVENUE
1)
revenue from sales and services
(B)
(C)
OPERATING COSTS
6)
for raw and subsidiary materials, consumables and goods
10)
d)write-down of receivables in current
14)
15)
revenue from equity investments:
16)
from securities entered in noncurrent assets not classified as equity investments
from securities entered in current assets not classified as equity investments
17)
interest and other financial charges
TOTAL C (15+16-17+ - 17 bis)
(D)
VALUE ADJUSTMENT TO FINANCIAL ASSETS
(E)
20)
21)
22)
a)
Current taxes
b)
Deferred and prepaid taxes
23)
The liquidator
Lorenzo Ferrigno
pag
128
Registered office: via Toscana, 8 - 90100 Palermo – Tax ID 01628410464 VAT no. 0527160828 – Palermo Business Information
Index no. 230322
Share Capital 1,032,000.00 entirely paid in – Palermo Business Registry
(in euro)
ASSETS
(A)
(B)
NONCURRENT ASSETS
I INTANGIBLE ASSETS:
II PROPERTY, PLANT AND EQUIPMENT:
III FINANCIAL ASSETS:
CURRENT ASSETS:
I INVENTORIES:
TOTAL INVENTORIES
II RECEIVABLES:
TOTAL RECEIVABLES
TOTAL
TOTAL
D)
31/12/2005
0
0
0
0
(C)
31/12/2006
PREPAID EXPENSES AND ACCRUED INCOME
TOTAL ASSETS
LIABILITIES
(A)
I SHARE CAPITAL
IV LEGAL RESERVE
VII OTHER RESERVES
(B)
(C)
(D)
ACCOUNTS PAYABLE
TOTAL LIABILITIES
MEMORANDUM ACCOUNTS
pag
129
0
0
13.848
13.848
0
13.848
974.000
974.490
882.579
0
0
755.688
0
0
1.285
10.706
1.857.864
1.740.884
0
0
1.857.864
1.754.732
31/12/2006
31/12/2005
1.032.000
0
0
1.444
0
0
1.032.000
0
0
1.444
0
0
0
0
-2.381.856
-696.101
-2.044.513
-1
-1
-8.448.247
6.066.391
-1.348.413
737.156
0
355.766
0
3.165.221
0
1.857.864
0
2.747.379
0
1.754.732
0
(in euro)
2.006
2.005
490
21.398
0
44.747
0
76.073
0
76.073
0
517.846
0
20.000
517.846
141.220
-517.356
-119.822
5
5
5
215.437
215.437
7
7
7
158.398
158.398
-215.432
-158.391
36.688
36.688
6.379.763
6.379.763
1
1
35.159
35.159
36.687
6.344.604
-696.101
6.066.391
23)
-696.101
6.066.391
(A)
OPERATING REVENUE
(B)
OPERATING COSTS
7)
10)
for services
11)
changes in raw and subsidiary materials,
consumables and goods
12)
accrual to provision for risks
14)
DIFFERENCE BETWEEN TOTAL OPERATING REVENUE
AND OPERATING COSTS (A-B)
(C)
16)
total
TOTAL
17)
TOTAL
TOTAL C (15+16-17+ - 17 bis)
20)
21)
The liquidator
Lorenzo Ferrigno
pag
130
400
Statement summarising the key figures from the latest financial statement available for associates.
(in thousands euro)
DIRECT EQUITY INVESTMENTS
Alfea S.p.A.
Società Gestione
Pisa
Capannelle S.p.A.
% of equity investment
Assets
Intangible assets
Property, plant and equipment
Financial assets
Liquid assets
Accounts receivable and other
Other assets
Total assets
Capital and liabilities
Share capital
Retained earnings (losses carried forward)
Other reserves
Total shareholders’ equity
Provision for termination benefits
Other provisions
Medium and long term loans
Accounts payable and other
Other liabilities
Total shareholders’ equity and liabilities
Revenue
Sales and services
Financial income
Other income
Loss for year
Total revenue
Costs
Purchases and services
Labour costs
Financial charges
Tax liabilities
Depreciation and amortization
Other costs
Profit for year
Total costs
Solar S.A
30,70%
30,70%
26,67%
24,43%
30%
2007
2006
31-03-07
2006
2006
154.922
158.935
2.168.152 1.856.933
47.282
44.355
1.351.48 71.463.752
1.945.523 2.385.442
1.836.784 1.492.647
7.504.150
7.402.064
674.399
7.022.432
1.582.200
371.597
5.143.374
15.261
14.809.263
679.629
7.183.835
1.582.200 49.557.360
226.870
34.401
3.953.326
15.959
13.641.819 49.591.761
1.890.800
-133.880
-1.798.830
39.114
-2.796
1.792.853
199.465
1.890.800
-1.201.264
-597.566
39.114
131.084
1.771.847
167.544
996.300
530.478
3.626.775
5.153.553
537.846
252.079
996.300
577.755
0
3.343.825
4.917.880
495.503
252.079
1.558.325
2.347
7.504.150
1.734.959 12.819.741 11.571.344
1.643
0
7.402.064 14.809.263 13.641.819
5.092.125
120.535
111.235
5.292.544
32.633
175.575
5.323.895
5.500.752
2.512.407
1.265.768
0
462.315
255.808
297.119
530.478
5.323.895
-
2.874.266
1.167.676
0
511.506
198.015
171.534
577.755
5.500.752
-
31.000
40.408
71.408
43.364.137
2.521.848 10.345.045
0
25.257
107.997 1.104.847
133.880 1.201.264
2.763.725 12.676.413
1.545.305
909.633
49.307
0
227.720
31.760
7.731.238
3.787.537
86.486
79.333
833.397
158.422
2.763.725
-
12.676.413
-
6.156.216
49.591.761
6.193.614
6.193.614
6.149.706
3.500
40.408
6.193.614
-
NOTES:
1) the figures for Alfea S.p.A. refer to 31/12/2007, the financial statements were approved by the Board of Directors.
2) the figures for Società Gestione Capannelle S.p.A. refer to 31/03/2007, the last financial statements approved to cover losses.
3) the figures for Solar S.A. refer to 31/12/2006, the last approved and available financial statements.
pag
131
Report of the Board of Auditors to the Annual General Meeting of the Shareholders of Snai S.p.A. in accordance with Art.
153 of Legislative Decree 58/1998 and Art. 2429, paragraph 3, of the Code of Civil Procedure.
Report to the Shareholders of the company SNAI S.p.A.
Dear shareholders
During the financial year which ended on 31 December 2007, we carried out the monitoring function provided for by law, also
taking into account the principles for the conduct of the Board of Auditors recommended by the Consigli Nazionali dei Dottori
1
2
Commercialisti e dei Ragionieri and the Consob notifications on company regulation and the function of the Board of Auditors.
Your Board of Directors has informed you in its report of the activities pursued and of the ordinary and extraordinary operations
and has provided a summary of the economic, asset and financial situation of the Company and the consolidated position of the
Group.
It was found that the accounts to 31 December 2007 have been drawn up in accordance with the international accounting principles
(IFRS) applicable on that date and are consistent with the accounting principles adopted in the report on the accounts to 31
December 2006.
This being the case and in accordance with the recommendations issued by Consob in the notification of 6 April 2001, as
subsequently amended and supplemented, we report as follows:
1
We have monitored compliance with the law and with the articles of association.
2
In the course of meetings of the Board of Directors, we have obtained information from the Directors on the activities
pursued and on the transactions of economic, financial and asset-related significance conducted by the Company (and
by its subsidiaries).
The transactions of economic, financial and asset-related significance are described in the Report on Operations of the
Board of Directors and/or in the Notes to the Accounts of Snai S.p.a for the financial year and in the notes to the
Consolidated Accounts for the year 2007.
The Board of Auditors has verified that the above transactions comply with the law, the company statutes and the principles
for the correct administration and has satisfied itself that that such transactions were not obviously imprudent, risky, in
potential conflict of interest or such as to compromise the soundness of the company’s assets.
As the Board of Directors noted in its report, the month of January 2007 saw an increase in the share capital with the
subscription and payment for unexercised rights: today the share capital of Snai S.p.a. is 60,748,992.20 euros made
up of 116,824,985 ordinary shares of nominal value 0.52 euros each.
The Board of Directors has approved a new business plan (for the period 2008-2012) which redraws the strategy of
the Company and the Group following the granting of new “concessions” for the collection of bets on horse racing and
sporting events after approval of law No. 248 of 6 August 2006 which introduced 16,300 new betting outlets, of which
the company was awarded 5,092.
The extraordinary general meeting of the shareholders on 30 June 2007 debated the adequacy of the articles of association
in view of Law No. 262/2005 and Legislative Decree No. 404/2006, together with the Consob Recommendation
as modified by resolution No. 15915 of 3 May 2007.
3
The Board of Directors also noted in its report that it had been notified by the Regional Attorney of the Corte dei Conti
of the Lazio Region of an invitation to submit its own conclusions with respect to an investigation into a supposition of
fiscal damages of around 4.8 billion euros (with the first hearing before the above Court being set for 4 December 2008).
4
In the meantime, the second session of the Lazio TAR issued a judgement on 1 April 2008 accepting the petition lodged
by the company Snai S.p.a. against the administrative provision issued by the Amministrazione Autonoma dei Monopoli
5
di Stato on 22 June 2007.
1
Italian business and accounting professional associations
2
Commissione Nazionale per le Società'88 e la Borsa = Italian committee for company and stock exchange regulation
3
Public Accounts Court = Italian institution responsible for safeguarding the public finances
4
Tribunale Amministrativo Regionale = Regional Administrative Court
5
Italian authority responsible for regulating betting, gaming, lotteries etc.
pag
133
Board of Statutory Auditors' Report
6
On 18 September 2007, the Company submitted a petition to the Direzione Centrale Normativa e Contenzioso and/or
7
the Agenzia delle Entrate for harmonisation and co-ordination of the international accounting principles and fiscal
regulations with respect to the correct statement in the financial accounts of the income and expenditure arising from fixed
odds betting. On the basis of the decision issued on 14 January 2008, the Company took steps to amend the statement
of the income and expenditure in question in the financial accounts criticised by the firm of auditors in the accounts relating
to the 2006 financial year.
The Report on Operations, to which reference is made, contains the analytical information relating to the above.
3
We have obtained information on and monitored, within our sphere of competence, the adequacy of the Company’s
organisational structure and compliance with the principles of correct administration by gathering information from those
responsible for the organisational function and through meetings with the auditing firm for the purposes of the mutual
exchange of relevant data and information. The Group’s organisational structure was found to be adequate for the
requirements of the various areas of business, taking into account the size and characteristics of the company. Moreover,
with regard to the decision-making process of the Board of Directors, the Board of Auditors has verified, including by
direct attendance at board meetings, that the management decisions taken by the Directors comply with the law and
with the articles of association and has verified that such decisions were, where necessary, supported by analyses and
advice produced internally or obtained from external experts.
4
We have obtained information on the instructions given by the Company to its subsidiaries as defined in Art. 114
paragraph 2 of Legislative Decree 58/98 and found these to be adequate to fulfil the communication duties provided
for by law, given the types and sizes of the companies themselves
.
5
We have assessed and monitored the adequacy of the internal control system and the administrative/accounting system
and the suitability of the latter to represent operational matters correctly. The Board of Auditors confirms that, although
there is no proper formal document for the internal evaluation of the company’s risk profile, the Company is able to monitor
the main economic and financial risks.
6
We have held meetings with representatives of the auditing firm, as specified in Art. 150 paragraph 2 of Legislative
Decree 58/98, from which we obtained relevant data and information, required for this report.
7
Non-typical and/or unusual activities, including those conducted within the group or with associated parties which are
likely to have a significant effect on the economic, asset-related and financial situation of the company. The Company
in compliance with Consob recommendation No. 606-4293 of 28 July 2006, in its explanatory note to the accounts,
has provided analytical information on the effect which activities and positions with associated parties (as defined in IAS
24)have had on the economic, asset-related and financial situation. Such activities are also described in the Directors’
Report on Operations.
8
Standard activities within the group: the companies of the Snai Group exchange goods and services amongst themselves
and with the parent company as required in the context of their operations. Such activities are conducted on “normal
market terms”. The current financial accounts with respect to the subsidiaries and the parent company are settled at rates
8
substantially in line with the “ABI” prime rate. Further details of activities within the group are contained in the Report
on Operations and the Notes to the Accounts.
9
Standard activities with other associated parties: the Company also conducts its own activities with respect to horse racing
and sporting concessionaires which hold a share in the share capital of the controlling shareholder Snai Servizi S.r.l. The
above activity relates primarily to telematic services in the context of the management of data flows relating to bets and
others services and sales of goods. During the 2007 financial year, the Company continued also to develop the marketing,
management and networking of slot machines with such concessionaires.
Furthermore, following the acquisition of 450 company branches, the former concessionaire vendors, holding a share
in the share capital of the controlling shareholder Snai Servizi S.r.l., signed a management contract with Snai S.p.a. under
which they provide services for the collection of bets and the payment of winnings to betting customers, retaining a fee
fixed in advance on the basis of standardised contracts regulated on market terms, similar to those of third party
concessionaires.
pag
134
10
The Auditors Reconta Ernst & Young S.p.a., in conjunction with the concluding phase of their verification activity, issued
their own reports in which they state that the Accounts for the financial year and the Consolidated Accounts to 31 December
2007 comply with the standards governing the criteria for drawing up accounts, have been drawn up with clarity and
are a true and accurate representation of the asset-related and financial situation, the profit and loss, the changes in net
assets and the cash flow of the company Snai S.p.a. for the financial year ending on such date. Such reports, to which
we invite you to refer, envisage a requirement for information.
11
The Board of Auditors has not received any notification under Art. 2408 of the Code of Civil Procedure or any complaint
during the financial year 2007.
12
We have noted the partial adherence of the Company to the Code of Self-Regulation defined by the Committee for
Corporate Governance of quoted companies and the publication in March 2006 of the new Code of Self-Regulation
for Quoted Companies.
The annual report on the system of Corporate Governance has also been issued and we invite you to refer thereto.
13
14
15
9
On 14 September 2007, the Board of Directors appointed, with our approval, the Dirigente Preposto , to whom it has
entrusted the role of preparing suitable administrative and accounting procedures for the preparation of accounting
information disseminated to the market and of monitoring actual compliance with such procedures, giving him sufficient
powers and means to carry out such functions. In this context it is noted that during the financial year 2008 the Auditors
Reconta Ernst & Young S.p.a., the company commissioned to audit the accounts, is assisting Snai S.p.a. in completing
documentation of the main administrative and accounting processes, designed to satisfy the requirements of Law No.
262 of 28 December 2005 “Provisions for the protection of savings and regulation of the financial markets” for a fee
of 120,000.00 euros.
With respect to the new requirements introduced by Law No. 262 of 28 December 2005 and Law No. 62 of 18 April
2005, the Board of Directors has approved, with effect from 1 April 2006, a new “Code of Practice for Internal dealing”
and has set up the “Register of persons with access to privileged information”.
The organisational model as specified in Legislative Decree No. 231/2001 is in the preparatory phase. It is designed
to prevent the possibility of committing the offences specified in the decree and consequently administrative liability on
the part of the company.
The Auditors Reconta Ernst & Young S.p.a., the company commissioned to audit the accounts, have requested a
supplementary payment of 100,000.00 euros, in view of the increased work carried out compared with that expected
and as a result of the non-repeated activities carried out during the year.
6
Central department for regulations and litigation
7
Italian Revenue Service
8
Association of Italian Banks
9
Manager in charge of drafting accounting and corporate records
pag
135
16
On the basis of documentation in its possession, the Board of Auditors notes that the company Snai S.p.a. has entrusted
“parties linked to the Auditors Reconta Ernst & Young S.p.a by on-going relationships” with certain assignments which
differ, in nature, from the auditing of accounts, described in summary below:
Company
Assignments
Accrued fees
in 2007
Project Gold
243,000.00
Project Jackpot
95,800.00
Reconta Ernst & Young Financial
Business Advisors S.p.a
Reconta Ernst & Young Financial
Business Advisors S.p.a
17
During the financial year 2007, the Board of Auditors issued the following opinions:
•
in favour of the appointment of the firm of auditors Reconta Ernst & Young S.p.a as defined in Art. 2409 fourth
paragraph of the Code of Civil Procedure and Art. 159 paragraph 1 of Legislative Decree No. 58/98;
9
•
in favour of the appointment of the Dirigente Preposto for the drafting of the company’s accounts in accordance
with the provisions of Art. 24 of the Articles of Association and with Art. 154 b b of Legislative Decree No.
58/98.
The aforementioned monitoring activity, starting from the date of the nomination of the Board of Auditors, which took place at the
assembly of 11 May 2005, was carried out over 10 meetings (in addition to occasional individual activities) of the Board and
by attending the 10 meetings of the Board of Directors in compliance with art. 149, section 2, Legislative Decree 58/59.
The Internal Review Committee, which was nominated on 17 May 2005, met 4 times over the course of the activity.
During the monitoring activity, and on the basis of the information obtained by the auditing firm, no omissions and/or no blameworthy
events, and/or no irregularities or, in any case, no sufficiently significant events such as to require the attention of the controlling
organs, nor mention in the present report, were found.
The Auditing Board, having considered the financial results at 31 December 2007, expresses no objections to the proposals of
the deliberations presented by the Board of Directors concerning the utilisation of the net profit for the year.
Mantua, 30 April 2008
The Auditing Board
(Francesco Lerro )
President
(Lorenzo Ferrigno)
Effective Auditor
Alessandro Carlotti
Effective Auditor
pag
136
Independent audi ting firm’s
report on the financial
statement
milan - piazza del duomo
Reconta Ernst &Young S.p.A.
della Libertà'88, 9
552485050129 Firenze
Tel.(+39) 055 552451Piazza
Fax (+39)055
www.ey.com
REPORT OF THE AUDITING FIRM
in accordance with Article 156 of Legislative Decree No. 58 of 24.2.1998 58
To the Shareholders
of SNAI S.p.A.
1.
We have performed the audit of the Annual Report, made up of the Balance Sheet, the Income Statement, and the Statement
of Transactions of the Net Assets, the Income Statement and the relative Explanatory Notes, of SNAI S.p.A, ending 31
December 2007. It is the responsibility of the Administrators of SNAI S.p.A. to compile the Annual Report. We are
responsible for the professional opinion expressed on the Annual Repor t based on the audit.
2.
Our review was conducted according to the audit principles and criteria recommended by CONSOB. In conformity with
the aforementioned principles and criteria, the audit was planned and carried out in order to acquire every element necessary
to determine if the Consolidated Financial Statements are defective due to significant errors and if they appear, overall,
reliable. The audit procedure includes the study, based on sample verifications, of the probative elements in support of the
balances and the information contained in the Annual Report, as well as the evaluation of the pertinence and the correctness
of the accounting criteria used and the reasonableness of the estimates made by the administrators. We consider that the
work performed supplies a reasonable base for the expression of our professional opinion.
The Annual Report gives for comparative purposes the figures corresponding to the previous fiscal year. As illustrated in
the Explanatory Notes, the Administrators have modified the comparative data relative to the Balance Sheet of the previous
fiscal year, which was audited by another auditor who issued the audit report on 27 April 2007. These modifications
concerned the criteria for the accounting of the funding stemming from the acceptance of the fixed-odds betting. The terms
of re-determination of the corresponding figures of the previous fiscal year and the information note given in the Explanatory
Notes, with regard to the modifications made to the aforementioned figures, have been reviewed by us for the purpose
of the opinion of the Annual Report for the fiscal year ending 31 December 2007.
3.
In our opinion, the Annual Report of SNAI S.p.A. at 31 December 2007 conforms to the International Financial Reporting
Standards adopted by the European Union, as well as the provisions issued in implementation of Article 9 of Legislative
Decree No. 38/2005. Furthermore, it is compiled with clarity and represents truthfully and correctly the net worth and
financial situation, the profit and loss statement, the changes in net worth and the cash flow of the Snai Group for the fiscal
year ending on that date.
Registered Office: 00196 Roma-Via C.D. Romagnosi, 18/A
Corporate Capital ¤ 1.303.500,00 i.v.
Registered at the S.O. of the Business Register at the CC.I.A.A. of Rome
Tax ID and Registration No. 00434000584
VAT No.00891231003
Registered in the Register of Auditors at No. 70945 Published in the Official Journal
Suppl. 13 – IV Special Series of 17/2/1998
Registered in the Special Register of Auditing Companies
Consob at Progressive No, 2 deliberation No. 10381 of 16/7/1997
Independent auditors’ report on the financial statements
4.
For a better understanding of the Annual Report, we bring your attention to the following information contained in the
Explanatory Notes:
•
with the slot machines (slot machines) as compensation in favor of the agents of the telecommunications network, as
required by Article 1, paragraph 530, letter c) of Law 266/2005. Relative to this compensation, the Autonomous
Administration of the Monopolies of State (“AAMS”) has not yet adopted the provisions required by the aforementioned
regulation for the determination of said contribution. The Administrators, having verified the existence for their own
telecommunications network of the technical parameters defined by the law in question, proceeded with the determination
supported by the evaluations of their own outside consultants.
•
The Company, as required by Law, inserted in the Explanatory Notes the essential figures of the last Annual Report of
the company that manages and coordinates its activity. The opinion on the Annual Report of SNAI S.p.A. does not
extend to these figures.
Florence, 30 April 2008
Filippo Maria Aleandri
(Partner)
pag
140
SNAI Group: consolidated
financial statement
at 31/12/07
and esplicatory notes
rome - piazza del pantheon
Consolidated financial statements
Gruppo SNAI
Consolidated income statement closed at 31 December 2007
Notes
4
5
6
Change in inventories of finished and
semi-finished products
7
8
9
Personnel expenses
10
11
EBITDA
12
EBIT
Financial income
Financial charges
13
PRE-TAX EARNINGS
Income taxes
14
Attributable to:
Profit (loss) of Group for year
Profit (loss) of minority interests for year
Basic share earning (loss) in euro
Diluted share earning (loss) in euro
25
25
of which
of which
Related
nonParties
recurring
note no.32 note no.34
492.546
9.057
2007
5.752
1.326
566
119
(12.413)
(357.494)
(17.473)
(31.312)
81.051
(39.274)
41.777
353
4.683
(42.825)
(37.789)
3.988
4.531
8.519
(170)
(92)
(77.358)
(125)
5.245
520
(2.987)
(4.810)
897
(1.363)
of which
of which
Related
nonParties
recurring
note no.32 note no.34
217.568 11.769
2006
(1.098)
(724)
(3.944)
(127.719) (64.847)
(19.357)
(152)
(10.904)
60.685
(31.580)
29.105
(202)
1.789
468
(30.318)
(2.453)
(28.731)
374
(2.256)
(1.882)
8.519
0
(1.882)
0
0,07
0,07
(0,03)
(0,03)
pag
143
826
2.135
335
Gruppo SNAI
Consolidated balance sheet at 31 December 2007
Notes
31/12/2007
of which
Related Parties
note no.32
31/12/2006
15
126.758
16.496
143.254
118.120
3.899
122.019
16
225.184
236.131
461.315
225.184
151.368
376.552
2.136
552
2.688
1.357
542
1.899
145
11.078
2.059
513.752
of which
Related Parties
note no. 32
ASSETS
Noncurrent assets
Goodwill
Prepaid taxes
Current assets
Inventories
Accounts receivable
Other assets
17
22
18
21
19
20
21
22
23
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
Group portion of Shareholders' Equity
Share capital
Reserves
Total Group Shareholders’ Equity
Minority interest
Total Equity
Deferred taxes
Current liabilities
Accounts Payable
Other liabilities
14.681
2.193
624.131
14.234
57.182
34.321
19.890
93.087
7
218.721
3.792
4.860
4.645
14.430
52.106
16.952
3.109
262.821
0
349.418
842.852
863.170
60.749
264.418
8.519
333.686
60.443
265.096
-1.882
323.657
24
333.686
323.657
26
27
18
28
29
5.433
313.488
43.966
7.437
13.874
384.198
30
29
32.300
60.465
13.383
18.820
32.203
124.968
842.852
27
pag
144
14.426
905
303
5.527
9.758
313.518
51.946
2.841
19.569
397.632
31.904
55.267
42.579
12.131
54.710
141.881
863.170
383
3.258
3.719
3.092
18.639
1.310
32.876
Notes
pag
145
1.268
0
0
0
211.319
(1.379)
208.955
3.743
208.955
208.955
Extraordinary
208.955
899
0
215.792
(6.837)
1.850
966
0
0
966
0
0
899
899
899
0
(1.850)
1.850
1.850
1.850
966
966
966
966
Extraordinary
Extraordinary
Extraordinary
Reserve
Law 72 of Law 413 of
reserve
19-03-1983
30-12-1991
899
1.850
0
0
Extraordinary
Extraordinary
Extraordinary
Reserve
Law 72 of Law 413 of
reserve
19-03-1983
30-12-1991
757
1.268
1.268
60.443
306
60.749
1.268
60.443
0
EXTRAORDINARY
YEAR
0
(1)
0
Extraordinary
Balance at 31/12/07
1.268
EXTRAORDINARY
RESERVE
60.443
SHARE
CAPITAL
60.443
1.268
28.570
31.788
(1)
(1)
EXTRAORDINARY
YEAR
(142)
Notes
1.268
28.570
1
1.268
EXTRAORDINARY
RESERVE
28.570
SHARE
CAPITAL
Balance at 01/01/07
Changes in classification
policy
24
Adjusted balances
Changes to equity for period
Total income and charges
recorded in period
24
expenses
24
Coverage of 2006 losses
24
Balance at 31/12/06
Balance at 01/01/06
Changes to accounting policy
Adjusted balances
Changes to equity for period
Total income and charges
recorded in period
Merger of Ippodromi San
Siro S.p.A. (formerly Società
Trenno S.p.A.)
with SNAI S.p.A.
85
Reclassification of merger reserves
Change in minority interest in
Ippodromi San Siro S.p.A.
Gruppo SNAI
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY AT 31/12/07
27.549
(1.882)
22.449
27.659
110
27.549
27.549
(1.160)
22.449
22.449
27.549
23.609
8.519
1.882
333.686
(1.379)
0
331.016
4.049
8.519
8.519
6.637
(1.160)
322.497
323.657
TOTAL
GROUP S.E.
323.657
0
0
(1.051)
(1.882)
(1.882)
EXTRAORETAINED PROFIT (LOSS)
EARNINGS
RDINARY
FOR YEAR
RESERVE (LOSS CARRIED
FORWARD)
23.609
(10.385)
8.478
8.503
81.976
247.580
(6.837)
(1.882)
(1.882)
10.385
83.858
0
83.858
TOTAL
GROUP S.E.
10.385
938
0
1.907
28.505
28.505
28.505
(113)
(2.750)
15.131
15.131
15.131
EXTRAORETAINED PROFIT (LOSS)
EARNINGS
RDINARY
FOR YEAR
RESERVE (LOSS CARRIED
FORWARD)
0
0
0
0
TOTAL
MINORITY
INTEREST S.E.
0
(511)
(113)
1.562
0
1.562
1.562
TOTAL
MINORITY
INTEREST S.E.
333.686
(1.379)
0
331.016
4.049
8.519
(1.160)
322.497
323.657
TOTAL
S.E.
323.657
(511)
0
83.538
247.580
(6.837)
(1.882)
85.420
0
85.420
TOTAL
S.E.
Gruppo SNAI – Consolidated cash flow statement
Notes
Group profit (loss) for year
Minority interest profit (loss) for year
12
Net change in assets (provision) for prepaid
(deferred) taxes
18
28
(Capital gains) capital losses on sale of
noncurrent assets (including equity investments)
Portion of equity investment results measured
with equity method (-)
13
Net change in noncurrent trade and other assets
21-29
Net change in current trade and other assets
19-20-30-29
26
CASH FLOW GENERATED (ABSORBED)
FROM OPERATING ACTIVITIES (A)
15
goodwill
16
concessions
16
Payables due to BAP extended to acquire
“concession” company branches
determined payables due to AAMS
29
deferred taxes on company branch acquisition
18
16
17
Acquisition of equity investments in subsidiaries,
net of acquired liquid assets
22
Payment collected from the sale of property, plant,
equipment, intangible assets and other noncurrrent assets
CASH FLOW GENERATED (ABSORBED) FROM
INVESTMENT ACTIVITIES (B)
27
27
Payables due to BAP extended to acquire
“concession” company branches
27
27
Other shareholders’ equity changes
24
24
CASH FLOW GENERATED (ABSORBED) FROM
FINANCIAL ACTIVITIES (C)
D. CASH FLOW FROM DISPOSED
ASSETS/AVAILABLE-FOR-SALE ASSETS (D)
E. TOTAL CASH FLOW (A+B+C+D)
F. INITIAL NET FINANCIAL ASSETS
(INITIAL NET FINANCIAL BORROWING)
G. NET EFFECT OF TRANSLATION OF FOREIGN
CURRENCY ON LIQUIDITY
H. FINAL NET FINANCIAL ASSETS (FINAL NET FINANCIAL
BORROWING) (E+F+G)
23
CASH AND CASH EQUIVALENTS NET OF SHORT-TERM
FINANCIAL PAYABLES AT THE BEGINNING OF THE
CASH AND CASH EQUIVALENTS NET OF SHORT-TERM
FINANCIAL PAYABLES AT THE END OF THE
2007
of which
Related Parties
note no.32
2006
8.519
0
39.274
-1.882
0
31.580
-11.583
4.596
3.269
-810
-25
125
-262
202
of which
Related Parties
note no.32
-5.836
383
-5.205
-383
-15.731
-4.325
-1.777
-3.961
0
-3.097
14.627
23.318
-29.584
-4.408
-213.454
-172.727
-116.614
-533
68.765
29.622
30.130
-680
-9
-16.636
-511
170
33
11
-163.334
-263.091
27.646
-9.159
-1.553
-41.024
-31.562
-641
294.810
-40.564
-1.160
2.670
240.715
-21.027
494.320
-169.734
254.547
262.821
8.274
93.087
262.821
262.821
0
9.322
-1.048
262.821
8.274
93.087
262.821
0
93.087
262.821
50.807
39
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING STANDARDS
SNAI S.p.A. (hereinafter also referred to as “parent company”) has its registered office in Porcari (LU) – Italy – Via Luigi Boccherini,
39.
The consolidated financial statements of Gruppo SNAI at 31 December 2007 include the financial statements of SNAI S.p.A.
and the following subsidiaries and associates consolidated on a line-by-line basis:
•
•
•
•
Società Trenno S.r.l. Unipersonale
Festa S.r.l. Unipersonale
Immobiliare Valcarenga S.r.l. unipersonale
Mac Horse S.r.l. Unipersonale
There have been no changes in the scope of consolidation compared to 31 December 2006.
The financial statements of the companies included in the scope of consolidation all close their financial year at the same time as
the calendar year (31 December) and were approved by their respective administrative bodies.
These consolidated financial statements were authorised for publication by the parent company following the board of directors
meeting of 28 March 2008.
(a) General standards
The consolidated financial statements at 31 December 2007 were prepared based on the IFRS in effect as of that date, issued
by the International Accounting Standards Board and adopted by the European Commission.
The accounting standards used to prepare these consolidated financial statements are in compliance with the accounting standards
used to prepare the consolidated financial statements at 31 December 2006 with the exception of what is indicated below in
the notes related the specific items.
The IFRS are considered also to be revised international accounting standards (IFRS and IAS) and all the interpretation of the
International Financial Reporting Interpretations Committee (IFRIC e SIC), adopted by the European Union.
As required by paragraph 28 of IAS 8, the IFRS in effect as of 1 January 2007 are indicated and briefly described below.
IFRS 7 Financial instruments: disclosures
Requires information which allows users of financial statements to assess the significance of the Group’s financial instruments and
the nature of risks associated with these financial instruments.
Amendment to IAS 1 Presentation of financial statements: information on capital
This modification requires the Group to provide new information which allows users of financial statements to assess the Group’s
objectives, policies and processes for managing capital. The required information is included in the notes.
IFRIC 7 Applying the restatement approach under IAS 29 “Financial reporting in hyperinflationary economies”
The standard is not applicable to the Group’s activities.
IFRIC 8 Scope of IFRS 2
The interpretation clarifies some aspects of IFRS 2 (share-based payments).
IFRIC 9 Reassessment of embedded derivatives
IFRIC 9 establishes that the date for assessing the existence of an embedded contract is the date when the entity becomes party
to a contract, with reassessment possible only if there is a change in the terms of the contract that significantly modify cash flow.
Since the Group does not hold any derivative instruments, application of IFRIC 9 did not have impacts on the Group’s financial
position or performance.
IFRIC 10 Interim financial reporting and impairment
IFRIC 10 requires that any entity not reverse an impairment loss recognised in a previous interim period for goodwill or an investment
in wither an equity investment held for sale or a financial asset carried at cost. Since the Group did not reverse any previously
recognised impairment loss, this interpretation did not have impacts on the Group’s financial position or performance.
IFRS and IFRIC interpretations not yet in effect
The Group did not apply the following IFRS, IFRIC Interpretations and amendments, which are published but not yet in effect:
IFRS 8 Operating segment
Requires more information which allows users of financial statements to have a better understanding of management’s reporting.
The Group is still evaluating the effects of these interpretations and related impact on its financial statements.
pag
147
IFRS 3R Business combinations and IAS 27/R Consolidated and separate financial statements
The two revised standards have been adopted as of January 2008 and will become effective for the first financial year following
1 July 2009. IFRS 3R introduces some changes in accounting for business combinations which will have effects on the amount of
recognised goodwill, result for the year the acquisition takes place in and results for subsequent years. IAS 27R requires that a
change in the investment in a subsidiary be recognised as an equity transaction. Consequently, this change will not have an impact
on goodwill, and will not give rise to gains or losses. In addition, the revised standards introduce changes in accounting for a
loss incurred by a subsidiary as well as loss of control. The changes introduced by the standards IFRS 3R and IAS 27R must be
applied prospectively and will have impacts on future acquisitions and transactions with minority shareholders.
IAS 1 Revised Presentation of financial statements
The revised IAS 1 standard Presentation of financial statements was adopted in September 2007 and will become effective during
the first financial year after 1 January 2009. The standard separates the changes in shareholders’ equity attributed to shareholders
and non-shareholders. The statement of changes in shareholders’ equity will only include the details of transactions with shareholders,
while all the changes related to transactions with non-shareholders will be presented on a single line. Moreover, the standard
introduces the “comprehensive income” statement: this statement contains all the income and cost items accruing during the period
recorded in profit and loss, and addition every other recorded income and cost item. The “comprehensive income” statement can
be presented as a single statement or in two correlated statements. The group is evaluating whether to prepare one or two statements.
Changes to IAS 32 and IAS 1 Held for sale financial instruments
The changes to IAS 32 and IAS 1 were adopted in February and will become effective in the first financial year after 1 January
2009. The change to IAS 32 requires that some held for sale financial instruments and bonds which occur at the time of liquidation
are classified as capital instruments if certain conditions are met. The change to IAS 1 requires that the explanatory notes include
some information related to held to sell options classified as capital. The Group does not expect these changes to have an impact
on the group’s financial statements.
IAS 23 Reviewed – Borrowing costs
The revised IAS 23 requires the capitalisation of borrowing costs where they are referred to assets which justify their capitalisation
(qualifying assets). An asset which justifies capitalisation is an asset which requires a significant amount of time before being ready
for its intended use or sale. This standard will be applicable from the financial year starting 1 January 2009. The Group is still
evaluating the effects of these interpretations and the related possible impact on its financial statements.
IFRIC 11 IFRS 2 – Group treasury share transactions
IFRIC 11 requires accounting got agreements which grant employees rights on enterprise equity instruments such as stock option
plans if the enterprise acquires these instruments from a third party, or if it is the shareholders to provide the necessary equity
instruments. This interpretation became applicable starting on 1 March 2007. The adoption of this standard, which will occur on
1 January 2008, will not have any effect on the company’s financial position or performance, since the Group currently does not
have any of this type of transactions.
IFRIC 12 Service concession arrangements
IFRIC 12 provides instructions on how to account for concessions granted by government or other bodies to private operators.
IFRIC 13 Customer loyalty programmes
IFRIC 13 provides accounting guidelines for a company that grants loyalty award credits (such as “points” or travel mile benefits)
for customers who buy goods or services. This interpretation is applicable for financial years starting at 1 July 2008, but does not
regard the Group.
IFRIC 14 IAS 19 – The limit on a Defined Benefit Asset, minimum funding requirements and the interaction
IFRIC 14 provides instructions on how to measure the economic benefit limit that can be recorded as assets in a Defined Benefit
Plan, in accordance with IAS 19 – Employee benefits The minimum funding requirement may cause effects on assets and liabilities
resulting from pension plans. This interpretation is applicable after 1 January 2008. The Group is evaluating the effect that this
interpretation will have on the Group’s consolidated financial statements once it is applied starting 1 January 2008.
The statements adopted by Gruppo SNAI for the financial year which closed at 31 December 2007 have been changed compared
to those adopted in the previous year, to better meet the provisions of IAS 1 and 7. The specific information is included in the
explanatory notes.
The Group adopted the following statements:
Balance Sheet
The presentation of the balance sheet is through separation of current and noncurrent assets and liabilities and for each asset and
liability item the amounts expected to be settled or received within 12 months from the date of the accounting situation.
Income Statement
The income statement records the items by nature, since it is considered to be the one which provides the most explanatory
information.
pag
148
On 31.12.07 the arrangement of the income statement was changed by eliminating the “operating revenue” item and reporting
in “revenue from sales and services” the change in fixed odd and totalisator odd sports and horse racing bets already net of winning
and reimbursements paid to betters, single tax accrued and withholdings on fixed and totalisator odd horse racing bets.
For more information, the directors’ report contains a comparison statement of the income values for 2007 in the same arrangement
as 2006 with comparative values. Adequate information on the adoption of the new arrangement is supplied in the notes to the
main income statement items.
Statement of changes in equity
The statement of changes in equity shows the financial year or period profit or loss, each item of income and expense, proceed
or charge which, as required by the International Accounting Principles and their interpretations, is recognised directly in equity,
together with the total of those items; the total profit or loss for the period, separately showing the amount attributable to equity
holders of the parent and to minority interest; for each equity item the effects of changes in accounting policies and corrections of
errors as required by the accounting treatment in Internal According Standard no. 8. In addition the statement presents the balance
of accumulated profits or losses at the beginning and end of the period and movements for the period.
Cash Flow Statement
The statement of cash flows presents the cash flows of operating activities, investing activities and financing activities. Cash flows
of operating activities are represented by the indirect method, where the profit or loss for the year or period is adjusted for the
effects of non-cash transactions, any deferments or accruals of previous or future receipts or operating payments, and income or
cost items connected with cash flows from investment or financial activities.
Compared to what was published in the financial statements at 31 December 2006, reclassifications have been made in order
to improve the recognition of the items of the income statement and balance sheet, limited to the following items:
• from the item “costs services and leased asset” to the item “revenue from
sales and services” for 369,143 thousand euro, related to winnings and reimbursement of fixed odds and totalisator odd horse
racing and sports betting;
sales and services” for 37,236 thousand euro, related to the single tax on horse racing and sports betting with fixed and totalisator
odds;
sales and services” for 2,783 thousand euro, related to UNIRE withholding on horse racing and sports betting with fixed and
totalisator odds;
• from the item “costs services and leased asset” to the item “financial charges” for 786
thousand euro related to fees on sureties;
•1,732 thousand euro from “other current assets” to “trade accounts receivable” related to the Slot ;
Slot provision for bad debt;
•32,375 thousand euro from “other current assets” to “trade accounts receivable” related to
receivables due from Slot customers;
•851 thousand euro from “liquid assets” to “trade accounts receivable” related to
direct debiting issued to Slot customers;
•1,848 thousand euro from “liquid assets” to “other current assets” related to
rid issued to Circuito Gold customer and concession managers.
(b) Basis of preparation
These consolidated financial statements, with amounts expressed euro rounded to the thousands, were prepared based on a general
policy of historic cost, with the exception of some property, land, plant and machinery measured at their deemed cost, as explained
below, as well as for derivatives (fixed odd and totalisator odd bets) and equity investments in other companies carried at fair value.
To prepare the financial statements in compliance with the IFRS, management must make measurements, estimates and assumptions
to apply the accounting standards that effect the amounts of assets, liabilities, costs and income recognised in the financial statements.
The estimates and related assumptions are based on previous experience and other factors considered reasonable for the specific
case. They were used to estimate the carrying value of assets and liabilities, which is not easy to deduce from other sources.
However, it is important to point out that since these are estimates the final results may not necessarily be the same as presented
here.
These estimates and assumptions are regularly reviewed. Any changes resulting from a review of accounting estimated are recognised
in the period when the review was performed.
The key assumptions concerning the future and other important sources of uncertainty in estimates at the closing date of the financial
statements, which could cause significant adjustments in the carrying values of assets and liabilities by the end of the next financial
year are described below.
Value impairment on non-financial assets
As of the date of each financial statements, the Group verifies if there are value impairment indicators for all non-financial assets.
Goodwill and other intangible assets with an indefinite useful life are tested annually for value impairment and if such indicators
pag
149
carrying value may not be recovered.
When the value in use calculations are prepared, the directors need to estimate the expected cash flows from the asset or cash
generating units and select an adequate discount rate in order to calculate the current value of these cash flows. Further details
and a sensitivity analysis of the key assumptions are indicated below.
Deferred tax assets
Deferred tax assets are recognised for unused tax losses, to the extent that it is probable that enough future tax profit will be available
against which the tax losses can be used. The directors are asked to make a significant discretional measurement to determine
the amount of deferred tax assets which can be recorded. They need to estimate the probable temporary manifestation and the
amount of further taxable profit as well as a planning strategy for future taxes.
Development costs
Development costs are capitalised based on the accounting standard described below. Initial capitalisation of costs is based on
the fact that management’s judgement on the technical and economic feasibility of the project has been confirmed. This normally
occurs when the project has reached a precise phase of the development plan. To determine the values to capitalise the directors
have to create assumptions concerning the expected future cash flows from noncurrent assets, discount rates to apply and the period
when the expected benefits will occur. At 31 December 2007, the best estimate for the carrying value of capitalised costs was
around 2,160 thousand euro.
The accounting standards described below have been applied consistently to all the companies of the consolidated SNAI group.
(c) Accounting policies and consolidation
(i) subsidiaries
Subsidiaries are companies where the parent company has the power to determine, either directly or indirectly, the financial and
operating policies in order to obtain the benefits resulting from its activities. The financial statements of subsidiaries are included in
the consolidated financial statements on a line-by-line basis from when the parent company starts to exercise control until the date
this control ends.
The portions of shareholders’ equity and the profit or loss attributed to minority interests are indicated separately, in the consolidated
balance sheet and income statement, respectively.
Some subsidiaries (Ristomisto S.r.l. and Teseo S.r.l., both in liquidation) are not consolidated on a line-by-line basis, where the
consolidation would not produce significant asset, liability, profit, loss and financial effects. These companies are measured with
the equity method and the effects on consolidated profit/loss and shareholders’ equity correspond to what would result from their
accounting on a line-by-line basis.
In the event of acquisition of a minority interest, any surplus in the price paid compared to the fair value of the acquired assets
and liabilities is accounted for as goodwill”.
(ii) associates
Associates are entities where the Group exercises a significant influence on the financial and operating policies, despite not having
control. The consolidated financial statements include the group’s portion of the associate’s profit or loss, which is recognised based
on the equity method starting from the date when the significant influence began until the date this influence ceases.
With the equity method, the investment in an associate is entered in the balance sheet at cost and increased by later variation to
the acquisition of net assets in the associate for the portion belonging to the group. Goodwill related to the associate is included
in the carrying value of the investment and is not subject to amortisation. The income statement reflects the amount belonging to
the Group of the associates profit or loss. If an associate record adjusts directly charges to shareholders’ equity, the Group recognises
its por tion and represents it, where applicable, in the statement of changes in shareholders’ equity.
When the group’s portion of loss in an associate exceeds the carrying value of the investment in this associate, the group zeros
out the equity investment and stops recognising its portion of additional losses, except to the extent that the group has undertaken
legal or implicit obligations or has made payments on behalf of the associate.
(iii) Transactions eliminated in the consolidation process
Inter-group balances, transactions, income and costs are completely eliminated in the consolidation process.
Unrealised profit from transactions with associates and jointly controlled entities are eliminated in proportion to the group’s interest
in the entity. Unsustained losses are eliminated equal to unrealised profit, but only in the absence of evidence of impairment.
(iv)Transactions in foreign currency
Foreign currency transactions are translated at the exchange rate ef fective on the transaction date.
Monetary amounts in foreign currency at the consolidated accounting situation reference date are translated into euro using the
closing exchange rate. Exchange rate differences resulting from translation are reported in profit and loss as financial income or
pag
150
charges. Non-monetary items carried at historical cost are translated using the exchange rate in effect when the transaction is first
reported. Non-monetary items carried at fair value in foreign currency are translated using the exchange rate in effect when the
fair values were determined.
(d) Property, plant and equipment
(i) Owned assets
Property, plant and equipment is entered at cost or substitute cost, net of accumulated depreciation and value impairment (see
standard g). The cost includes any additional directly attributable costs and the initial estimate, where necessary, of the cost to
dismantle and remove the asset and restore the site where it was located and lastly, an adequate amount of production expenses
for internally constructed items.
Extraordinary maintenance and repair costs, which increase the useful life of property, plant and equipment, are capitalised and
depreciated based on the remaining possibility to use the asset. Other repair and maintenance costs are recorded in the income
statement when they are incurred.
If property, plant and equipment are composed of various components with different useful lives, these components are recorded
separately.
If events or changes in situations indicate that the carrying value may not be recovered, these are subject to testing and if the
carrying value exceeds the presumed realisation value (represented between the higher between sales price and use value), the
asset is written down.
(ii) Finance and operating leases
Finance lease assets which transfer substantially all the risks and benefits of ownership are classified as finance lease assets. Assets
used by the group, acquired by finance lease, are recorded at the fair value of the leased asset or, if less, at the current value of
minimum payments due for the lease, each calculated at the beginning of the contract, net of accumulated depreciation (as indicated
below) and value impairment (see standard g).
Costs for operating leases are recognised in the income statement on a straight-line basis for the duration of the contract.
(iii) Depreciation
Depreciation of property, plant and equipment is systematically charged to the income statement on a straight-line basis in relation
to the useful economic-technical life of related assets, defined as its useful life. Land is not depreciated. The following annual
depreciation rates are used:
• Buildings: from 3% to 11%
• Plant and machinery: from 5% to 33%
• Fixtures and equipment: from 7.75% to 15%
• Other assets: from 6% to 100%
The residual value and useful life of the asset and methods applied are reviewed annually and adjusted as needed at the end of
each financial year.
(iv) Derecognition
An asset is removed from the balance sheet when it is sold or no future benefits are expected from its use or disposal. The gain or
loss (calculated as the difference between proceeds from the sale and carrying amount) are included in the income statement for
the year when it is disposed.
(e) Intangible assets
(i) Goodwill
For acquisition of companies or company branches, the acquired assets, liabilities and potential liabilities are recognised at the
current fair value at the date of acquisition. The positive difference between the acquisition cost and the fair value of these assets
and liabilities is entered in the balance sheet as goodwill and classified an intangible assets.
Any negative different (“negative goodwill”) is entered in the income statement at the time of the acquisition.
Goodwill is considered an asset with an indefinite life and it is not amortised, but it is annually or more frequently (if specific events
of changed circumstances indicate impairment) tested to identify any impairment, according to IAS 36 – Impairment of Assets
(impairment test) conducted on the cash generating unit which management allocated the goodwill to. Any write-downs cannot
later be reversed.
(ii) Other intangible assets
The other intangible assets acquired or produced internally are entered as assets, as set forth in IAS 38 – Intangible assets, when
it is probable that use of the asset will generate future economic benefits and when the asset cost can be reliably determined.
These assets are initially recognised at acquisition or production cost and later net of amortisation, calculated on a straight-line
basis for the entire estimated useful life.
pag
151
Research cost is recognised as expense at the time it is incurred.
Development costs, which require application of research results to a plan or project for the production of products or new or
substantially improved processes, are capitalised only after technical and commercial feasibility of the product or process and the
group has sufficient resources to complete its development. Capitalised costs include expenses for materials, direct manpower and
an adequate portion of general production costs.
The other development costs are recognised in the income statement for the financial year in which they are incurred. Capitalised
development costs are entered net of accumulated amortisation and value impairment (see standard g).
The costs for internally generated goodwill and brands, are recognised in the income statement in the period in which they are
incurred.
Subsequent costs for intangible assets are capitalised only when there is an increase in the expected future economic benefits
attributable to the assets they refer to. All other subsequent costs are recognised in the income statement for the period in which
they are incurred.
Concessions, licenses, trademarks and similar rights are capitalised only when there is an increase in the expected future economic
benefits attributable to the assets they refer to. All other subsequent costs are recognised in the income statement for the period in
which they are incurred.
(iii) Amortisation
Amortisation of intangible assets is charged to the income statement on a straight-line basis for their useful life, with the exception
of those with an indefinite life and goodwill which are not amortised, but for which the group regularly tests their value impairment.
However, this test is performed at the closing date of all financial statements.
Intangible assets with a finite useful life are amortised starting when the asset is available for use.
The following annual amortisation rates by type are used:
• development costs: from 20% to 33%
• industrial patent rights and licences to use original works: from 10% to 33%
• concessions, license, trademarks and similar rights: from 10% to 33%
• horse race and sports concessions and sports and horse race licences: based on the duration of the concession with expiration
between 31/12/2001 and 30/06/2016
• others: from 10% to 33%
(f) Inventories
Inventories are measured at the lower between cost (acquisition or production) and market value, calculating the cost with the first
in – first out (FIFO) method. Recognition of warehouse inventories includes direct costs of materials and labour and indirect costs
(variable and fixed). Write-down provisions are calculated for products considered obsolete or with slow turnover, taking into account
their future expected use and realisation value.
(g) Value impairment on non-financial assets
The group annually tests the carrying value of its assets to identify any impairment. If, based on these tests, assets are discovered
to have undergone impairment, the group estimates the recoverable value of the assets.
The recoverable value of goodwill, indefinite life assets and intangible assets not yet available for use, is estimated at the closing
date of each balance sheet, even if there are no indications of impairment.
The recoverable value of is the greater of the fair value of the asset or cash generating unit, net of sales costs, and its use value.
The recoverable value is calculated per single asset, except when the asset generates cash flows which are not fully independent
from those generated by other assets or groups of assets.
Any impairment of cash generating units is first allocated to reduce the carrying amount of any goodwill allocated to the cash
generating units and then, reduce the carrying amounts of the other assets of the unit proportionally to each asset which is part of
the unit.
To determine the use value of an asset the accounting standard requires that the current value of estimated future cash flows be
calculated, pre-tax, by applying a discount rate that reflects current market assessment of the time value of money and the risks
specific to the asset An impairment loss is recognised if the recoverable amount is below the carrying amount. When later, an
impaired asset, other than goodwill, no longer exists or has reduced, the carrying amount of the asset or cash generating unit is
reversed.
(h) Reversal of impairment loss
Reversal of impairment loss for goodwill is prohibited.
pag
152
With the exception of goodwill, the impairment of an asset is reversed when there is an indication that the impairment no longer
exists or when there has been a change in the measurement used to determine the recoverable value.
The carrying amount following a reversal should not be more than the carrying value that would have been determined (net
amortisation) of the impairment had not been recognised.
(i) Equity investment and other financial assets
IAS 39 covers the following types of financial instrument: financial assets at fair value through profit or loss; loans and receivables;
held-to-maturity investments and available-for-sale assets. Initially all financial assets are recognised at fair value, increased in the
event of assets other than at fair value with changes for additional charges in profit and loss. The Group determines the classification
of the financial assets at the time of their initial recognition.
(i) Equity investments and available-for-sale financial assets
Equity investments in other companies (with a holding less than 20%) are measured at fair value, with effects recognised in
shareholders’ equity; when their fair value cannot be reliably determined, the equity investments are carried at cost adjusted for
impairment, and recognised in profit and loss. The original value is only restored when the reasons for the write-downs recognised
in shareholders’ equity cease to exist.
The risk resulting from ay impairment exceeding shareholders’ equity is recognised in a specific provision for risks to the extent that
the investor company is committed to fulfilling legal or implicit obligations for the investee.
(ii) Other financial assets
Government bonds which the group intends to hold until their natural maturity, having the ability to do so, are measured at amortised
cost net of impairment.
Other current financial assets include balances of financial accounts due from other companies subject to control by the same parent
company and non-consolidated subsidiaries.
(j) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments not quoted on an active market.
After initial recognition these assets are measured at amortised cost using the effective discount rate method net of any accruals
for impairment.
Current receivables were not discounted since the effect of discounting cash flows is irrelevant. Profit and loss recorded in the income
statement when the loans and receivables are derecognised or when impairment occurs as well as through the amortisation process.
Fair value
For securities widely traded on active markets, the fair value is determined referring to the quoted market price recorded at the
end of trading on the closing date of the financial year. If a market for an investment is not active, the fair value is established using
a valuation technique based on: arm’s length transaction prices; current market value of another instrument that is substantially the
same, discounted cash flow analysis and option pricing models.
Amortised cost
Held-to-maturity financial assets and loans and receivables are measured at amortised cost. Amortised cost is calculated using the
effective interest rate net of any accruals for impairment. The calculation takes into account any premium or discount on the acquisition
and includes transactions costs and fees which are an integral part of the effective interest rate.
Impairment on financial assets
The group assesses at each balance sheet date if a financial asset or group of financial assets is impaired.
If objective evidence exists that a loan or receivable entered at amortised cost is impaired, the amount of the loss is measured as
the difference between the carrying amount of the asset and the present value of estimated cash flows (including losses of future
credit not yet incurred) discounted at the asset’s original effective interest rate (or the effective interest rate calculated at the initial
recognition date). The asset carrying value is reduced using a provision.
The amount of the loss is recorded in the income statement.
If, in a subsequent period, the amount of the impairment loss decreases due to an event occurring after the impairment was initially
recognised, the previously recognised loss is reversed.
Any subsequent reversals are recognised in profit and loss, to the extent that the asset carrying value for not exceed the amortised
cost on the reversal date.
In terms of trade accounts receivable, an accrual for impairment is made when objective evidence exists (for example a probability
of insolvency or significant financial problems of the debtor) that the group will not be able to recover all the amounts due at the
original conditions of the invoice.
The carrying amount is reduced using a specific provision. Receivables subject to impairment are reversed when they are unrecoverable.
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153
(k) Cash and cash equivalents
Cash and cash equivalents include cash on hand, on - sight deposits, current and highly liquid investments which are easily
convertible into cash and which are subject to an irrelevant risk or value change.
(l) Financial liabilities
Financial liabilities are initially recognised at fair value net of transaction costs. After initial recognition they are measured at amortised
cost, recording any difference between the cost and repayment amount in profit and loss for the duration of the liability, according
to the effective interest rate method.
Current payables are not discounted since the effect of discounting cash flows is irrelevant.
All profit and loss is recorded in the income statement when the liability is extinguished, as well as through the amortisation process.
Financial liabilities at fair value through profit and loss
Liabilities held for trading are those acquired for short term selling. Derivatives are classified as financial instruments held for sale
unless they are designated as effective hedging instruments. Profit and loss on liabilities held for sale are recorded in the income
statement.
Derecognising financial assets and liabilities
A financial asset (or, where applicable, a part of a financial asset, or part of a group of similar financial assets) is derecognised
when:
• the rights to receive cash flows from the asset are transferred;
• the entity has retained the contractual rights to receive the cash flows from the asset, but has assumed a contractual obligation
to remit those cash flows on to a third party without material delay;
• the entity has transferred the rights to receive cash flows from the asset and (a) has substantially transferred all the risks and
rewards of ownership of the financial asset or (b) has not substantially transferred nor retained all the risks and rewards of the
asset, but has transferred its control.
A financial liability is removed from the balance sheet when the obligation underlying the liability is expired, cancelled or discharged.
(m) Termination benefits (Italian TFR)
The termination benefits are considered a defined benefit plan according to IAS 19.
The liability related to the defined benefit programme, net of any assets for the plan, is determined based on actuarial assumptions
and is recorded based on consistent accrual for the services needed to obtain the benefits; measurement of the liability is performed
by an independent actuary.
As of 1 January 2007, the Finance Act and relative implementing decrees introduced significant changes in the rules governing
TFR, including the workers' choice of the destination for benefits earned to supplementary pension schemes, or “Treasury Fund”
managed by INPS (Italian Social Security).
Therefore the result, is that the obligation to INPS and contributions to supplementary pension schemes have assumed the nature
of a “Defined contribution plan” according to IAS 19, while the amount entered with the provisions for TFR maintain the nature of
a “Defined benefit plan”.
Gains or losses resulting from the actuarial calculation are recognised in the income statement as a cost or income.
(n) Provisions for future risks and charges
The group accrues a provision in the balance sheet when it has undertaken an obligation (legal or constructive) as the result of a
past event and it is probable that it will be necessary to use resources which product economic benefits to fulfil the obligation. If
the effect is significant the amount of the provisions is represented by the current value of estimated future cash flow discounted at
a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the liability.
(o) Leases
The definition of a contract as a lease transaction (or containing a lease transaction) is based on the substance of the contract and
requires assessing if fulfilment of the contract depends on the use of one or more specific assets or if the contract transfers the right
to use for the asset. A review is performed after the start of the contract only if one of the following conditions occurs:
there is a change in the contractual conditions, other than a renewal or extension of the contract;
a renewal option is exercised or an extension is granted, unless the terms of the renewal or extension are initially included in the
lease transaction terms;
there is a change in the condition according to which fulfilment depends on a specific asset; or there is a substantial change in
the asset.
Where a review is performed for situations 1, 3 or 4 above, the recognition of the lease starts or ends from the date the circumstances
change which gave rise to the review. Where a review is performed for situation 2 above, the recognition of the lease starts or
pag
154
ends from the renewal or extension date.
For contracts signed before 1 January 2005, the start date is considered 1 January 2005 in accordance with the temporary
provisions of IFRIC 4.
Operating leases
Lease payments for operating leases are recognised as an expense in the income statement on a straight-line basis for the duration
of the contract.
Finance leases
Finance Lease contracts, which transfer substantially all the risks and rewards of ownership of the leased asset to the Group are
recorded on the starting date of the lease at fair value of the leased asset, or if lower, at the current value of the lease payments.
Lease payments are apportioned between the principle and interest in order to obtain a constant rate of interest on the remaining
balance of the liability. Finance charges are booked directly to the income statement.
Recognised leased assets are depreciated over the shortest time period between estimated useful life and the duration of the lease
contract, if there is no reasonable certainty that the Group will obtain ownership at the end of the lease.”
(p) Revenue and costs
Revenue are recognised to the extent that it is likely that economic benefits will flow into the group and their amount can be reliably
determined. Revenue is represented net of discounts, allowances and returns.
In particular, revenue for the sale of assets is recognised when the risks and rewards of ownership of the asset are transferred to
the buyer, the sales prices is established or determinable and collection is expected: this time generally corresponds to the date of
delivery or shipment of the asset.
Revenue from performance of services are recognised when the services are provided; in particular, revenue from computerised
services to agencies total 1.2% of the volume of bets received by the agencies and 13% of the games performed on amusement
machines (“slot machines”).
Revenue connected with concessions related to slot machines are recognised net of the tax withholding (PREU) and paid winnings
(totalling 75% of played volume) and gross of fees to pay to managers and operators (totalling 11.5% of the games, 6% for BAP)
as well as the payment for the concession to pay to AAMS, totalling 0.8% of the game volume).
As of 1 January 2007 amusement machine network licensees are owed 0.5% of game movement as a reverse of the AAMS
concession payment.
based on IAS 32 and 39 the collection of fixed odd and totalisator odd bets generates a financial liability which is measured
using the fair value method. Therefore the collection connected with the acceptance of fixed and totalisator odd bets (or bets related
to which the Group sustains a risk resulting from winnings) is entered in the balance sheets under “Revenue from sales and services”
net of the costs for the single tax, the UNIRE withholding, winnings and reimbursements paid to bettors.
For greater clarity the consolidated income statement shows a detail of the movement net of cancellations of fixed and totalisator
odd bets as well as the related costs for winnings and reimbursements.
Revenue connected with totalisator bets are instead recognised based on the commission percentage established by the agreement
for operating the bets, on average around 11.8%.
Revenue and costs related to bets are recognised at the time the event is realised on which the bet is accepted.
Revenue for services is recognised on an accrual basis when the service is delivered.
Costs for services are recognised on an accrual basis when the service is received.
Government grants
Grants from the government and other public agencies are represented by U.N.I.R.E. (National Union for Horse Race Increase)
investment fund grants and grants paid for services delivered by the horse race track management company for the benefit of the
U.N.I.R.E. Public Agency owner of the proceeds for collection of bets on horse races being performed at these race tracks. They
are recognised at their fair value when there is a reasonable certainty that they will be granted and when the group has met all
the conditions necessary for obtaining them. Grants obtained to compensate incurred costs are charged to the income statement
systematically in the same periods when the related costs are recorded. Grants obtained to compensate an asset entered in the
balance sheet are systematically charged to the income statement under the item other operating revenue based on the useful life
of the related asset.
(q) Financial income and charges
Financial income and charges are recognised on an accrual basis based on accrued interest using the effective rate of interest.
(r) Income taxes
Income taxes include current and deferred taxes calculated on the taxable income of the group companies. Income taxes are
recognised in the income statement, with the exception of those related to transactions recognised directly in shareholders’ equity,
which are accounted for in shareholder’s equity.
pag
155
Current taxes represent the estimate of the amount of income taxes calculated on the taxable income for the year, determined by
applying the annual weighted average of the expected tax rates for the entire year.
Prepaid and deferred taxes are set aside using the so-called liability method on temporary differences between the carrying amount
of assets and liabilities entered in the balance sheet and corresponding values recognised for fiscal purposes, with the exception
of temporary differences recognised for the initial recording of goodwill, initial recording of assets and liabilities which do not affect
booked profit or taxable income and differences related to investments in subsidiaries for which it is probable, in the predictable
future, that the temporary difference will not reverse. Prepaid tax assets and deferred tax liabilities are measured using the tax rates
expected to be applied during the year when the asset will be realised or the liability will be settled that they refer to, based on
the tax rates established by current provisions of substantially in effect at the financial statement reference date.
Prepaid tax assets are recorded to the extent that it is probable that there will be a future taxable income against which these assets
can be used, including based on the Group company budgets and tax policies. The carrying amount for prepaid tax assets is
reduced to the extent that it is not longer probable that the related tax benefit is realisable.
(s) Segment reporting
A segment is a distinctly identifiable part of the group, that provides products or services (activity segment) or provides products or
services in a particular economic environment (geographical segment). . Segment information is presented by “business segment”.
The primary segment, is based on the management structure and reporting system within the group. The secondary segment,
identifiable with the geographical segment, is not considered significant at present since the group does not have risks and returns
which are different in terms of the various geographical areas in Italy where the group operates.
(t) Available-for-sale assets and transferred operating assets
The group measures a noncurrent asset (or group being disposed of) classified as available-for-sale at the lower of its carrying
amount and fair value net of sales costs.
Impairment after the initial measurement of an asset classified as available-for-sale is recognised in profit or loss, even if these assets
have been revalued. The same treatment applies to profit and loss on its next measurement.
A transferred operating asset is a group component which represents an important independent branch of activity or activity
geographical area or is a subsidiary exclusively acquired to be resold.
An operating asset is classified as transferred at the time of the transfer or when it meets the condition for the classification in the
“available-for-sale” classification, if earlier. Even a group being disposed of can be under transferred operating asset.
(u) Earnings per share
Basic earnings per share are calculated by dividing the profit of the group by the weighted average of shares in circulation during
the period. For the purposes of calculating diluted earnings per share, the weighted average of shares in circulation is modified
assuming a conversion of al the potential share having a dilution effect.
2. AGREEMENTS FOR CONCESSION SERVICES
SNAI S.p.A. holds the following concessions:
• “Concession Agreement for assignment of activation and operation of the computerised management network for legal
gaming through amusement machines as well as connected activities and functions”. Expiration date: 31 October 2010 unless
extended by AAMS for up to another year.
Transfer of assets required under article 15.
• “Concession for the assignment of public activities and functions related to “concorsi pronostici” (pools) as well as other
possible games connected to sports events”, expired 30 June 2007 and later extended until 31 December 2007.
This concession expired on 31.12.2007. The activity connected to this concession will be performed starting on 1 January
2008 by the concession holders of the so-called Bersani Licences (from article 38 paragraphs 2 and 4 of the Italian Decree
Law no. 223 of 4 July 2006 converted with modifications and integrations by Law no. 248 of 4 August 2006) and holders
of all the other concessions for horse racing and sports bets.
• 218 concessions for “sale of fixed odd bets on sports events, other than horse races, and non-sports events” whose expiration
date is scheduled for 30/06/2012.
• 98 concessions for “sale of totalisator bets and horse race fixed odd bets” whose expiration date is scheduled for
30/06/2012.
• 134 concessions for “conducting horse race fixed odd and totalisator bets” whose expiration date is scheduled for
31/12/2011 (historic horse race concessions).
•
“Concession to conduct public gaming as per article 38, paragraph 4 of the Decree Law no. 223 of 4 July 2006 converted
Gazette of the Republic of Italy no. 186 of 11 August 2006”. The subject matter of this concession are the activities and
functions for conducting public gaming for horse races, through the activation of distribution networks and related management.
The public gaming per the concessions described above entails:
pag
156
a) totalisator horse racing bets;
b) fixed odd horse racing bets;
c) totaliser bets;
d) sports “concorsi a pronostici”;
e) totip;
f) ippica nazionale;
g) remote skill games;
h) all other public gaming based on horse racing, which AAMS deems at any time to want to market through the network
of horse racing shops and/or network of horse racing points and/or network of remote horse racing.
The public gaming above, which can be marketed by each distribution network includes:
a) with reference to the network of horse racing shops, those under letters a), b) c) d), e) f), h);
b) with reference to the network of horse racing points, those under letters c), d), e), f), h);
c) with reference to the network of remote horse racing, those under letters a), b) c), d), e) f), g), h).
AAMS may suspend, at its own discretion and without any indemnity for the licensee, at any time during the period of
validity and effectiveness of the concession, the sale of one or more public gaming types cited above.
•
•
•
Awarding of the right for activation of the remote horse racing network.
“Concession to conduct public gaming as per article 38, paragraph 2 of the Decree Law no. 223 of 4 July 2006 converted
Gazette of the Republic of Italy no. 186 of 11 August 2006”. The subject matter of this concession are the activities and
functions for conducting public gaming for events other than horse races, through the activation of distribution networks
and related management.
The public gaming per the concessions described above entails:
a) fixed odd bets;
b) totalisator bets;
c) sports “concorsi pronostici”;
d) totip;
e) ippica nazionale;
f) remote skill games;
g) all other public gaming based events other than horse racing, which AAMS deems at any time to want to market through
the network of sports gaming shops and/or network of sports gaming points and/or network of remote sports gaming.
AAMS may suspend, at its own discretion and without any indemnity for the licensee, at any time during the period of
validity and effectiveness of the concession, the sale of one or more public gaming types cited above.
prot. no. 2007/49/R/Giochi/UD.
Awarding of the right for activation of the remote sports gaming network.
3. SEGMENT REPORTING
Segment information is presented by “business segment”. The primary segment, is based on the management structure and reporting
system within the group. The secondary segment, identifiable with the geographical segment, is not considered significant at present
since the group does not have risks and returns which are different in terms of the various geographical areas in Italy where the
group operates.
Intersegment transfers are made at market conditions.
Segment profit include elements directly attributable to a segment or reasonably allocable to a segment.
Elements which are not attributed mainly include overhead not directly chargeable to the three main activities, financial charges
and taxes, as well as loan contracts and assets used for supplementary common activities.
Segment investments include the total cost of investments sustained in the year to acquire multi-year segment assets.
The group is active in the following main segments:
• concessions;
• betting services;
• horse race track management.
Specifically the group’s activity has been defined as follows:
Concessions: this segment includes the activities connected with the management of horse race and sports concessions, acquired
starting from 16 March 2006 and those which SNAI S.p.A. was awarded with the call for tenders of the so-called Bersani decree
pag
157
for assigning activation and operation of the computerised management network for legal gaming using amusement machines as
well as connected activities and functions” (slot machines) which in the financial statements at 31 December 2006 were included
in the “Betting Services” segment and have now been appropriately reclassified.
Betting services: this segment includes activities connected with the computerised services supplied to bet acceptance points, and
for accepting event outcome contest bets; these activities are substantially managed by the company SNAI S.p.A. for the part
related to the gaming and betting segment, Festa S.r.l. and Mac Horse S.r.l.;
Horse race track management: this segment includes activities connected with horse race track management, both in terms of real
estate management, and organisation of races; these activities are managed by the companies Trenno S.r.l., Immobiliare Valcarenga
S.r.l. and SNAI S.p.A. for the real estate segment.
The table below provides information on the contribution to consolidated values of the bet collection activities and connected services
to the segment called “betting services”, bet acceptance activity in group owned horse race tracks and activities connected to their
management called “horse race track management” and activities related to horse racing and sports concessions as well as the
computerised network concession for machined and devices as per article 110 paragraph 6 of T.U.L.P.S. (Slot machines) called
“concessions”.
The segment result includes segment income and all the costs directly or indirectly attributable to it.
Revenue from the sale of software and technology, set-ups and other revenue not part of the three main activities are not charged
to the main segments; consequently, costs connected with the aforesaid revenue are not attributed to the specific segments, other
than general costs not directly attributed to the three main activities, but to governance of the enterprise on the whole.
Classification by geographical segments is currently not deemed significant for the reasons explained above.
The “concessions” segment includes all the bets, both with fixed odds (whose bank is the responsibility of the licensee) and with
totalisator (whose bank is the responsibility of the Ministry of Finance), accepted in BAP (bet acceptance points) directly managed
following acquisition of the 450 “concession” company branches and through the call for tenders under the so-called Bersani
decree.
For fixed odd bets the risk if of the licensee since it has the obligation to pay winnings and taxes, while for totalisator bets the
licensee has not risk since it is due a percentage of its movement.
Revenue from accepting fixed odd and totalisator bets net of winnings and reimbursements (487,239 thousand euro), Single Tax
(36,429 thousand euro) and UNIRE Withholding (3,785 thousand euro) totalled 99,485 thousand euro for the year.
Revenue mainly increased due to the new method for recognising revenue resulting from the concession for running the amusement
machine network paragraph 6 – Slot machines (for more information see note 4) as well as higher revenue related to the direct
management of bets recognised for the entire year.
pag
158
pag
159
0
639
30.646
2.081
10.646
-1.055
26.728
3.322
12.450
of which: DEPRECIATION, AMORTISATION
AND WRITE-DOWNS
-650
0
2.362
-4.001
28.096
86
3.855
341
-3.987
26.546
49
3.522
-204
0
2.125
HORSE RACE
TRACK MANAGEMENT
31-12-2007 31-12-2006
0
3.226
1.331
117.515
14.240
14.240
0
2.114
122.863
12.044
12.044
0
27.053
6.177
6.177
BETTING SERVICES
31-12-2007 31-12-2006
SEGMENT REVENUE
INTERSEGMENT REVENUE
OPERATING INCOME
Portion of equity investment income
Financial (charges) income
Income taxes
INCOME STATEMENT BY
ACTIVITY SEGMENT
PROPERTY, PLANT AND EQUIPMENT
AND INTANGIBLE ASSETS
NOT ATTRIBUTED
112.262
111.348
16.946
3.922
9.401
HORSE RACE
TRACK MANAGEMENT
31-12-2007 31-12-2006
10.107
BETTING SERVICES
31-12-2007 31-12-2006
SEGMENT ASSETS
13.153
12.988
NOT ATTRIBUTED
0
EQUITY INVESTMENTS
0
TOTAL ASSETS
26.141
SEGMENT LIABILITIES
9.617
TOTAL LIABILITIES
9.617
INVESTMENTS:
((values in thousands of euro)
-33.687
430.422
0
33.756
-25.717
158.658
0
25.651
0
386.064
0
413.365
164.974
164.974
363.137
50.228
CONCESSIONS
31-12-2007 31-12-2006
0
139.853
0
0
536.083
86.323
86.323
471.210
64.873
CONCESSIONS
31-12-2007 31-12-2006
-936
14.497
629
-8.284
12
-821
7.483
302
-10.714
2
0
154
568
17.814
6.117
6.117
201
17.045
OTHER
31-12-2007 31-12-2006
0
194
574
15.972
4.385
4.385
326
15.072
OTHER
31-12-2007 31-12-2006
0
-4.037
0
0
0
0
0
0
0
0
0
0
-2.432
0
ELIMINATIONS
31-12-2007 31-12-2006
0
0
0
0
0
0
0
0
ELIMINATIONS
31-12-2007 31-12-2006
564
390.705
6.025
1.899
863.170
191.508
863.170
492.546
81.302
-39.274
499.743
0
41.777
353
-38.142
4.531
8.519
-31.580
223.333
0
29.105
-202
-28.529
-2.256
-1.882
CONSOLIDATED TOTAL
31-12-2007 31-12-2006
2.286
143.912
8.697
2.688
842.852
112.369
842.852
595.872
102.499
CONSOLIDATED TOTAL
31-12-2007 31-12-2006
EXPLANATORY NOTES FOR THE MAIN ITEMS OF THE INCOME STATEMENT
The comparison of values, always expressed in thousands of euro, is performed with the corresponding balances at 31 December 2006.
The structure of the income statement adopted for the current 2007 financial statements was adopted following a specific petition
to the Italian Tax Office which confirmed that there would be not tax assessment consequence for the company from adopting the
new structure which requires, among other things, the elimination of “Operating revenue” and the recognition in “Revenue for sales
and services” of the fixed odd sports bets and fixed odd and totalisator horse racing bets, already net of winning and reimbursements
paid to bettors, single tax and Unire withholding.
4. REVENUE FROM SALES AND SERVICES
The amount of revenue from sales and services significantly increased compared to 2006 rising to 492,546 thousand euro from
217,568 thousand euro, broken down as follows:
thousands of euro
Net revenue for fixed odd and totaliser odd bets
Revenue for totaliser horse racing bets (BAP)
Revenue for bet collection services
Revenue for computerised bet collection
services BAP customers
Corner customer services
Horse racing totaliser and Ippica Nazionale race
commissions previously TRIS bet collection revenue
Revenue from event outcome contests
Revenue from SNAI CARD (former Gioca Sport)
Revenue from Slot Machines
AAMS grant – Slot Machine Concession
Revenue from bingo services
Revenue from set-up and technology sales
Revenue from bet management at horse race tracks
Revenue from advertising campaigns
Help desk switchboard and audiotel services
Horse race track and real estate management
Revenue from technical assistance contracts
Revenue from exercise of licences
Other services and sales to others
Total
2007
99,485
80,123
12,585
2006
66,446
65,854
18,352
Change
33,039
14,269
-5,767
1,595
844
1,643
-48
844
5,931
390
2,090
231,111
8,950
98
13,512
22,490
359
92
3,202
1,237
6,053
2,399
492,546
6,096
528
992
25,654
-165
-138
1,098
205,457
8,950
0
6,639
3,877
84
-13
-291
5
6,053
1,085
274,978
98
6,873
18,613
275
105
3,493
1,232
0
1,314
217,568
Net revenue from bet acceptance at fixed and totalisator odds (BAP) totalled 99,485 thousand euro for 2007, against 66,446
thousand euro at 31 December 2006; revenue from totalisator (BAP) horse racing bets totalled 80,123 thousand euro for 2007,
against 65,854 thousand euro at 31 December 2006; both entries are the result of direct management of horse racing and sports
bets started on 16 March 2006 with the acquisition of 450 company branches for horse racing and sports concessions and it
increased starting at the end of the first half of 2007 in part thanks to the opening of new horse racing and sports gaming licences
(corners and shops) resulting from the awarding of concessions from the so-called Bersani call for tenders.
For fixed and totalisator odd bets (BAP) the concession holder assumes the risk (bank).
The table below shows the breakdown of the “Net revenue from fixed and totalisator odd bet collection” which shows the items
related to winnings, reimbursement and related taxes, unlike what was shown in the consolidated financial statements at 31
December 2006, where the revenue was represented gross of the aforesaid items.
thousands of euro
Revenue from Fixed Odd Sports / Car – Motorcycle Bets
Winnings and Reimbursements for Fixed Odd Sports and
Car – Motorcycle Bets
Single Tax on Fixed Odd Sports / Car – Motorcycle Bets
Net Fixed Odd Sports/Car– Motorcycle Bets
Revenue from FO Horse Racing
and Totalisator Odd Horse Racing
Horse Racing FO and Totaliser
Odd Winnings and Reimbursements
Horse Racing FO and TO Single Tax
Horse Racing Withholding
Net Fixed Odd and Totalisator Odd Horse Racing Bets
Total
2007
586,752
2006
446,731
(457,349)
(34,574)
(348,204)
(35,872)
94,829
62,655
40,186
28,877
(29,890)
(1,855)
(3,785)
(20,940)
(1,364)
(2,782)
4,656
99,485
3,791
66,446
The revenue from totalisator horse racing bets (BAP), 80,123 thousand euro at 31 December 2007 represents a percentage of
pag
160
the volume on collected bets established by law.
Revenues from bet collection services (third party licensees) totalled 12.585 thousand euro (18,352 thousand euro), the decrease
of 5,767 thousand euro is mainly due to a change in corporate strategy which, with the acquisition of 450 company branches,
passed from only service provider to betting licensee and, consequently, with the acquisition of customer concessions, SNAI lost
the related revenue of 1.20% for the provider service to the 450 concessions from the date of the acquisition; moreover, a drop
was recorded in horse racing bets witnessed also on a national level.
The increase in revenue resulting from the concession to run the network of amusement machines paragraph 6 (Slot machines) is
due to the new accounting method used for them, adopted following issue of a decree on 17/05/06 from the Director General
of the Amministrazione Autonoma dei Monopoli di Stato published in the Italian Official Gazette of 07/07/06 which defines
the “Requirements of third parties assigned to collect (TIR) bets through machines with cash winnings”.
The new contracts became effective 01/01/07, both with managers (assigned third parties) and operators, implementing the
instructions of the decree.
The revenue recognised at 31 December 2007 totalled 13% of the movement generated by Slot Machines and thus are expressed
gross of the compensation contractually recognised to the manager – TIR – and operator. These costs are shown in the item costs
for services and leased assets in note 9.
Revenue from sales and services in 2007 included 8,940 thousand euro for the recognition of 0.5% of played sums in that period
with amusement machines (slot machines), as compensation, required by article 2, paragraph 530, letter c) of Law 266/2005
(2006 Financial Act), paid to computerised network licensees.
The Lazio regional administration court, T.A.R., granted the petitions submitted by some concessionaries, and deeming the continued
inertia of AAMS to be unjustified, it demanded AAMS pay the compensations. With this ruling, the Lazio regional administration
court confirmed the right due to licensees for what was determined with the 2006 Financial Act.
Lastly, in the draft decree prepared by AAMS, for the purposes of revising the slot machine convention, the provision of the granted
accruable up to 0.5% of the collection, has been entered in the new convention between AAMS and the licensees as a contractual
element. The value of the grant, may vary based on a series of service and investment parameters. In its current state, the draft
decree which determines the parameters for paying the convention grant is at the European Commission which is preventively
assessing, among other things, if the compensation as per article 1, paragraph 530 of Law no. 266/2005 may possibly be
considered as State aid not allowed under EU law.
Based on the opinions of legal experts does no believe that risks exist such as to define the above proceeds as State aid. Moreover,
based on the opinions of technical consultants it feels that the service levels reached as enough for recognition of the entire proceeds
in revenue.
Revenue from set-up and technological sales totalled 13,512 thousand euro and were mainly due to gaming terminals produced
for the new points of sale. he item also includes 11,544 thousand euro of internal production technologies which are the subject
of rental contracts (lease-back) recorded under “property, plant and equipment” as described in note 15. This amount accounts
for around 2% of all revenue from sales and services.
The increase in revenue from bet management at horse race tracks is due to grants for the so-called customisation of metropolitan
Horse Race Tracks for the years 2005 to 2007.
The activity related to the new concessions awarded with the call for tenders under the Bersani decree started towards the end of
the second quarter of 2007. The “Revenue from exercise of licences” item totalling 6,053 thousand euro contains the payments
for the first activation for sports and horse racing shops/corners with the stipulation of new management contracts; revenue and
proceeds for the bet acceptance activities are recognised in the specific revenue from betting items.
5. OTHER REVENUE AND PROCEEDS
The amount of other revenue and proceeds totals 5,752 thousand euro (5,245 thousand euro).
This item contains the following positive income items:
2007
2006
Change
Rental income
Sale of option rights
Revenue from asset capitalisation
Compensation for damages and insurance reimbursements
Income transactions
Capital gains on sale of assets
UNIRE investment fund grant
INPS MI injunction to pay 2005
555
1,604
169
101
1,982
1,166
28
147
771
1,203
0
402
97
119
9
509
2,135
-216
401
169
-301
1,885
1,047
19
-362
-2,135
Total
5,752
5,245
507
thousands of euro
pag
161
It is important to note:
the amounts received essentially referable to payment for damages from the settlement of arbitration hearings with some horse racing
and sports betting licensees for 1,982 thousand euro;
the apportioned payment of 169 thousand euro related to the transfer to others of the option right for the acquisition of the Milano
San Siro property complex, with the exception of the gallop race track;
settlement income for 1,166 thousand euro basically referred to the settlement of potential lawsuits on open contracts.
The “other revenue and proceeds” item mainly includes charge back of expenses to third parties.
6. INCREASE OF INTERNALLY GENERATED FIXED ASSETS
Increases of internally generated fixed assets, totalling 1,326 thousand euro (520 thousand euro) are related to the development
of:
• Betsi 2006 system;
• SLOT system – new messages and Paragraph 6A;
• odds and information display system for Bersani corners and shops;
• computerised system, related to computer and remote gaming acceptance terminals;
• gaming software for upgrading to new sports bet acceptance protocol (PSR), established by AAMS which became effective on
2 April 2007;
•central systems: sports and horse racing betting protocol (PSSI) and ABMS system for gaming control;
• prototypes and preseries for the creation of a “Design System SNAI” for Shops and Corners to set up following awarding of
the new Bersani Decree licences.
7. CHANGE IN INVENTORIES OF FINISHED AND SEMI-FINISHED PRODUCTS
The change in inventories of finished and semifinished products totalling 119 thousand euro (-724 thousand euro) is due to the
increases in final inventories of finished products, recorded following the production of gaming terminals (Betsi, Punto SNAIWeb
Small, Large and BiBest) intended for the new points and corners awarded with the 2006 calls for tenders.
8. USED RAW MATERIALS AND CONSUMABLES
The used raw materials and consumables total 12,413 thousand euro (3,944 thousand euro) and mainly refer to the raw material
used to produce the new gaming terminals (Betsi, Punto SNAIWeb Small, Large and BiBest).
9. COSTS FOR SERVICES AND LEASED ASSETS
These totals 357,494 thousand euro (127,7119 thousand euro), the breakdown is shown in the table below.
2007
2006
Change
Utilities and telephone
Horse race track management:
Horse racing agency grants
Assistance and maintenance
Bookmaker fees
Consulting
Installation, logistics and designing costs
Costs for Slot services
Costs for SNAI CARD point services
Payment for bet acceptance management
Insurance
Advertising and PR
Freelancers and commissions
Television services
Other
IT services
Outsourced processing
Costs for high security
Directors’ fees
Statutory auditor’s fees
Independent auditor’s expenses
Expense accounts for directors/auditors
Operating leases
Rentals
Rent expense
6,225
2,448
403
4,987
1,800
7,204
1,669
203,141
2,708
102,671
516
9,387
1,908
395
3,364
1,130
1,043
58
1,043
178
419
87
3,561
410
739
5,511
2,710
424
4,146
1,812
3,406
893
10,711
1,070
82,219
507
4,631
1,358
2,557
660
290
45
1,260
160
325
146
2,012
298
568
714
-262
-21
841
-12
3,798
776
192,430
1,638
20,452
9
4,756
550
395
807
470
753
13
-217
18
94
-59
1,549
112
171
Total
357,494
127,719
229,775
thousands of euro
pag
162
The a significant part of the increase in costs for 229,775 thousand euro is due to the cost for slot machine services (for a total of 203,141 thousand
euro compared to 10,711 thousand euro the previous year) which increased by 192,430 thousand euro due to different accounting for the business,
explained in detail in the revenue section (note 4), and include both the compensation for the manager (assigned third party) and the compensation
for the operator, including the fees due to the BAP for SNAI owned Slot Machines.
The BAP that have transferred to the concessions are due a management payment for acceptance of bets and services connected with collection
of bets totalling 8% of the movement of collected gaming. The BAP and other participating points are also recognised a payment totalling 10% of
the recharges made at the point of sale. The total payment of 102,671 thousand euro paid to the BAP and participating points of sale is calculated
based on specific contracts. The direct management activity of the concessions started on 16 March 2006 with the acquisition of “horse racing/sports
concessions” company branches and increased with the activation of horse racing and sports licences connected to the awarding of the so-called
Bersani call for tenders.
The increase in costs related to “Advertising and PR”, for 4,756 thousand euro, is mainly due to the advertising campaign to spread awareness
of the “SNAI brand” and new public and institutional relations especially aimed at new potential bettors.
The consultation item contains costs for participation in the Superenalotto call for tenders for 2,203 thousand euro. Costs for “operating leases”
are related to lease payments due for the year 2007 for contracts for the use of IT and digital equipment; the increase in this item is connected to
the stipulation of new contracts to enhance central system hardware, and make terminals and machines available in the gaming points for activation
of the so-called Bersani licences. The item, “other,” mainly includes the following: security and armoured car service, cleaning services, inter-group
services rebilled by the parent company and other sister companies, postal and shipping expenses, rubbish costs, IT services and management of
vehicles.
Remuneration for directors and statutory auditors
This item includes the remuneration owed to the directors, totalling 1,043 thousand euro (1,260 thousand euro) and remuneration for the statutory
auditors, totalling 178 thousand euro (160 thousand euro) as voted during the shareholders’ meeting. The remuneration paid to the directors and
statutory auditors of the parent company during 2007, SNAI S.p.A. and its subsidiaries are reported in the statement at the end of the explanatory
note to the parent company’s financial statements.
10. PERSONNEL EXPENSES
The cost of personnel for 2007 totalled 17,473 thousand euro, against 19,357 thousand euro for 2006, with a decrease of 1,884 thousand
euro.
thousands of euro
2007
2006
Change
Salaries and wages
Contributions on salaries and wages
Inail premiums
Various contributions
Accrual for defined benefit plan
Training costs
Business trips
Meal vouchers and company canteen
Uniforms
Gifts to employees
Other personnel expenses
15,289
3,820
50
332
-2,817
29
255
460
27
18
10
14,084
3,610
50
8
917
14
201
436
9
16
12
1,205
210
0
324
-3,734
15
54
24
18
2
-2
Total
17,473
19,357
-1,884
The “accrual to defined benefit plans” item includes the income statement effects of the measurement of termination benefits as per
IAS 19. The decrease is due to the recalculation (so-called curtailment) of the termination benefits due to a change in Italian law
which requires companies with more than 50 employees, to allocate the amounts of termination benefits accruing in the period to
pension funds managed by others (industry funds, INPS, insurance companies, banks, etc.).
The size of staff at the end of the period is shown in the table below, which shows an increase of 39 units compared to 31
December 2006, mainly due to increase in staff in operating departments, to support the expansion in activities resulting from direct
management of the acquired concessions, including following the October 2006 call for tenders of October, and development
pag
163
31.12.2006
Started in period
Left in period
31.12.2007
Average size
for period
16
300
110
1
131
13
0
95
11
17
336
112
16.42
346.75
116.08
426*
145
106
465**
479,25
2007
2006
Change
Environment testing and health surveillance
Accruals and losses on receivables
Use of provision for bad debts and risks
Representation and gift expenses
Other taxes
Licences and concessions
Property tax
Other administrative and operating expenses
Stationery and consumables
Books, newspapers and magazines
Expense transactions
Capital losses on sale of assets
Penalties and compensation for damages
% of Non-deductible VAT
38
1,957
-35
4,810
1,172
416
16,921
477
865
211
31
183
3
231
4,032
35
955
-1,113
45
690
387
6,390
475
439
167
32
810
134
175
1,283
3
1,002
1,078
4,765
482
29
10,531
2
426
44
-1
-627
-131
56
2,749
Total
31,312
10,904
20,408
Executives
Workers
Total Employees
* of which 48 part-time and 12 on maternity leave
** of which 47 part-time and 9 on maternity leave
11. OTHER OPERATING EXPENSES
Other operating expenses totalled 31,312 thousand euro (10,904 thousand euro).
thousands of euro
The licences and concessions item includes, among other things:
• Concession payments for legal gaming with amusement machines (“slot machines”) for 14,179 thousand euro, calculated every
fifteen days for 0.80% of the gambled volumes;
• payment for the 2006/2007 football season for the event outcome contest concession expired on 30 June 2007 and extended
until 31 December 2007 for 248 thousand euro;
• the concession payment, for 1,819 thousand euro, for the sale of fixed odd bets on sports events, other than horse racing,
and non-sports events as per article 4 of the convention approved with Directorial Decree 2006/22503 of 30/06/06; this
decree established that starting January 2007 the licensee is required to pay AAMS the six month concession payment for the
six months in progress by 16 January and 16 July of each year;
• the portion of concession payment accrued on public gaming for the year 2007 on licences awarded with the 2006 call for
tenders, as required by the concession, totalling 609 thousand euro.
In 2007 accruals were made to the provision for risks totalling 4,810 thousand euro to adjust the provision for risk to the amount
exceeding the value of the equity investments, in relation to the greater losses of the subsidiary Teseo S.r.l in liquidation (394
thousand euro) and sister company Tivù + in liquidation (950 thousand euro) as well as allocations for various disputes and lawsuits
underway both (2,642 thousand euro) and allocation related to technological upgrading as required by article 19 of the
“Specifications” for “assignment of concession for the activation and operation of the computerised management network for legal
gaming using amusement machines as well as connected activities and functions” for 824 thousand euro.
Accruals were also made to the provision for bad debt for 1,620 thousand euro to adjust the provision to the current possibility of
realising receivables.
The “% non-deductible VAT” is due to the distinct types of activities, performed by SNAI S.p.A. and Trenno S.r.l. which partly general
revenue for services taxable in terms of VAT and partly revenue exempt from VAT, with consequent effect on non-deductibility of
VAT on purchases.
The companies SNAI S.p.A. and Trenno S.r.l. have opted for activity separated for the purposes of VAT; this decision means that
for purchases referred activity that generates taxable operations, VAT is entirely deducted, while it is entirely non-deductible on those
purchases referred to activities which generate exempt operations.
In terms of taxes related to goods and services generally used by all the activities, VAT is deducted within the limits of the part
attributable to the year the activity refers to; to this end the cost of deductible VAT has been calculated by determining specific
breakdown criteria.
pag
164
12. DEPRECIATION AND AMORTIZATION
Depreciation and amortisation total 29,274 thousand euro (31,580 thousand euro) with an increase of 7,694 thousand euro
mainly due to the amortisation of the concessions for the acceptance of horse racing and sports bets, acquired in March 2006
and horse racing and sports licences from the Bersani call for tenders which were activated in 2007.
intangible assets
property, plant and equipment
2007
31,851
7,423
2006
24,922
6,658
Change
6,929
765
Total
39,274
31,580
7,694
thousands of euro
13. FINANCIAL INCOME AND CHARGES
The financial income and charges item shows net charges for 37,789 thousand euro (charges for 28,731 thousand euro) with
an increase of 9,058 thousand euro and are broken down as shown below:
housands of euro
Income and charges from equity investment
Revaluation (write-down) of Alfea S.p.A. equity investment
Revaluation (write-down) of Connext S.r.l. equity investment
Revaluation (write-down) of Capannelle S.p.A.
Revaluation (write-down) of Solar S.A.
2007
2006
Change
342
0
-1
12
353
128
2
-332
0
-202
214
-2
331
12
555
7
16
192
100
0
7
60
105
4
14
434
849
1
0
1,789
-6
-7
133
78
158
-4
22
46
-4
-9
2,593
-367
0
261
2,894
278
440
106
8
0
786
76
430
420
194
0
0
23,361
2,853
1,366
0
0
30,318
-28,731
-278
-68
-61
-3
17
3,607
-76
-328
-420
243
4
75
10,674
-1,331
-17
255
214
12,507
-9,058
Financial income
Interest income in government securities
1
Profit on security trading
9
Interest income due from parent company SNAI Servizi S.r.l.
325
Interest income from Tivu + S.p.A. in Liquid.
178
Interest income from Teleippica Srl
158
Interest income from La Televisione S.r.l. in Liquid.
3
Interest income from Ristomisto S.r.l. in Liquid.
82
Interest income from Teseo S.r.l. in Liquid.
151
Interest income from SNAI Promotion S.r.l. in Liquid.
0
Profit on exchange rates
5
Interest income from banks
3,027
Interest income on other receivables
482
Interest income on security deposits
1
Other financial income
261
4,683
Financial charges
Interest expense due to Teleippica S.r.l.
0
Bank charges
372
Interest income due to other companies
45
Loss on exchange rates
5
Loss on securities
17
Commission on sureties
4,393
Commission on sureties from SNAI Servizi S.r.l.
0
Interest expenses on bank c/a
102
Interest expenses on consolidated bank borrowing
0
Interest expenses on leases
437
Interest expenses on tax liabilities
4
Interest expenses on other loans
75
Interest in Junior and Senior loans
34,035
Financial charges on vendor loan
1,522
Financial charges on determined payables
1,349
Interest and termination benefit discounting
255
Financial charges and various fees
214
42,825
Total
-37,789
pag
165
Financial charges include:
• charges calculated at amortised cost required by IAS 39 by applying the effective interest method for loans opened for acquisition
of “Concession” company branches (for greater details on the loans see note 27) for a total of 34,035 thousand euro of which
3,841 thousand euro recognised as accessory costs;
• the interest calculated on the extension of payables due from BAP for the acquisition of company branches due to the discounting
of the payable established contractually without explicit interest (1,522 euro);
• implicit interest calculated to discount the medium-long term determined payables due to AAMS, granted at the time of acquisition
of the Concessions (1,349 thousand euros);
• fees on sureties also include costs incurred for participation in the Superenalotto call for tenders for 1,098 thousand euro, as
well as fees on existing sureties.
The item other financial income contains interest income matured on bank c/a for 3,027 thousand euro;
For additional details related to existing entries with group companies, see note 32 “Related Parties”
14. INCOME TAXES
Current income taxes, including IRES and IRAP of the companies consolidated on the line-by-line basis, as well as prepaid and
deferred taxes recognised in 2007, total – 4,531 thousand euro.
Thousands of euro
2007
IRES
IRAP
Accrual to provision for deferred tax liabilities
Use of provision for deferred tax liabilities
Prepaid taxes
Use of prepaid tax assets
IRES/IRPEG from previous years
Total
2006
3,297
2,970
5,872
-13,841
-9,018
6,053
136
226
2,203
2,932
-7,688
-463
5,046
0
-4,531
2,256
The table shown below contains a reconciliation between the carrying amount for IRES and IRAP from the consolidated financial
statements for 2007 and the theoretical amount (in thousands of euro):
Pre-tax earnings
Theoretical IRES tax
Theoretical IRAP tax
Total theoretical taxes
permanent differences
fiscal losses
33%
4,25%
irap
permanent differences (including employees)
prepaid tax effect on temporary differences taxed subs years
deferred tax effect on temporary differences deduc subs years
effect for use of temporary differences for previous years
taxes previous years
Effective taxes due
-114%
pag
166
31.12.2007
3.988
1.316
1.259
2.575
7.228
-6.094
3.308
536
-2.997
1.981
-1.259
1.241
-1.444
799
2.374
1.711
-9.018
5.872
-7.788
136
-4.531
33%
4,25%
31.12.2006
374
123
934
1.057
103
1.269
-463
2.932
-2.642
603%
2.256
For additional details on the effects from the tax charge and the fiscal consolidation see what is specified in detail in note 18
“Prepaid and deferred taxes” in these explanatory notes.
There are no disputes or assessments with the tax administration for the purposes of VAT and direct taxes which could give rise to
additional tax liabilities.
The year 2002 has been settled for the purposes of direct and indirect taxes.
For the transfer of the Montecatini horse racing track and registration of the mortgage to guarantee the loan contract three payment
notices were immediately contested notified to SNAI S.p.A. by the local Tax Authority – Provincial Office of Pistoia – Pescia Section
– for a total of 2,610 thousand euro on the basis of the autonomy of the acts drafted and authenticated by the drafter notary who
had previously requested and obtained registration including at the Territorial Agency – Real Estate Publication Service of Milan,
where it was acquitted for the entire proportional tax. In the delay of the dispute, despite the unfavourable ruling to the company
in the primary jurisdiction, after hearing the tax consultants the Board of Directors is assessing the possible liability.
EXPLANATORY NOTES TO THE MAIN ITEMS OF THE BALANCE SHEET
The comparison of values, always expressed in thousands of euro, is performed with the corresponding balances at 31 December
2006.
15. PROPERTY, PLANT AND EQUIPMENT
The amount of property, plant and equipment at 31.12.2007 totalled 143,254 thousand euro (122,019 thousand euro), the
changes for the period are due to the combined effect of depreciation for the period totalling 7,423 thousand euro, investments
for 29,584 thousand euro, reclassifications for + 25 thousand euro and disposals, net of accumulated depreciation, for sales for
–951 thousand euro.
In thousands of euro
Land and
Buildings
Plant and
machinery
Fixtures and
equipment
Other
assets
Construction
contracts and
advances
Total
126.169
Reclassifications
1
Other increases
196
Decreases
-86
126.280
Reclassifications
11
Other increases
1.098
Decreases
127.389
50.032
5.768
4.168
31
186.168
42
2.420
-1.556
50.938
-8
347
-108
5.999
8
252
-543
3.885
-43
1.193
1.181
0
4.408
-2.293
188.283
618
23.048
-146
74.458
-79
413
-8
6.325
-116
4.857
-70
8.556
-238
168
-943
168
196
29.584
-1.167
216.896
41.620
5.090
3.655
0
3.676
215
173
-1.579
-202
43.717
5.189
-417
86
3.325
4.128
324
353
-142
240
47.943
-4
47
5.556
-70
-116
3.492
0
61.810
0
6.658
0
-2.204
0
66.264
0
7.423
0
-216
171
73.642
114.724
8.412
678
513
31
124.358
112.247
110.738
7.221
26.515
810
769
560
5.064
1.181
168
122.019
143.254
Cost
11.445
2.594
Impairment
Disposals
-6
Reclassifications
14.033
Amortisation for period
2.618
Impairment
Disposals
Reclassifications
16.651
Carrying amounts
At 1 January 2006
At 31 December 2006
At 31 December 2007
pag
167
-86
0
The land and buildings include the property in Porcari, leased from the company Ing Lease Italia S.p.A., for a historic cost of 3,500
thousand euro, of which 382 euro related to the land, and accumulated depreciation of 328 thousand euro at 31 December
2007. Moreover the item land and buildings includes the Milan and Montecatini property owned by the parent company SNAI
S.p.A. and the subsidiary Immobiliare Valcarenga S.r.l.
The payments for finance leases are shown in the table below:
thousands of euro
Total commitment at 31/12/07
of which
Payments due within 12 months
Payments due from 1 to 5 years
Payments beyond 5 years
Redemption
Total
34,138
6,736
26,480
922
713
The commitments for lease payments refer to the following contracts:
• Finance lease contracts signed with the company Ing Lease Italia S.p.A. related to the acquisition of the building located in
Porcari (LU) with expiration in June 2016.
• Contract for the acquisition of technology for the new points of sales and shops for 4,155 thousand euro (lease-back) signed
in December 2006 with expiration in December 2011. At the end of the contract three options are possible: return of the
ask for a bid.
• Contract for finance lease acquisition of technology and furniture for the new points of sales and shops for 4,389 thousand
euro (lease-back) signed in September 2007 with expiration in September 2012. At the end of the contract three options are
possible: return of the machines, extension of the lease and purchase of the machines. The extension of the lease is planned
for additional one year periods upon request of the company. In the event of purchase of the machines, the company must
send a written request and ask for a bid.
• Two contracts signed at the end of the month of December 2007 with expiration in December 2012 for finance lease acquisition
of technology for the new points of sale and shops for 23,496 thousand euro (lease-back). Both contracts have a purchase
option for the machines by a third party buyer, in the event of failure to sell for any reason, there is an automatic renewal for
an additional twelve month period.
The company owned plant and machinery include the electrical, water, fire-fighting and air conditioning systems as well as work
to bring them up to standard, electronic machines, amusement machines (slot machines), the “pda” used for their online connection,
as well as machines for normal activity.
The increases for the year, totalling 29,584 thousand euro, mainly refer to:
• 1,098 thousand euro for land and buildings for property improvements;
• 23,048 thousand euro for plant and machinery, primarily related to:
• technology supplied on loan in the new point opened following awarding of the so-called Bersani call for tenders (3,467
thousand euro);
• internally generated technology, on particular Betsi terminals, installed on loan in the new points (Bersani licences) and in sports
agencies following updating of the sports gaming protocol starting in April 2007 (2,626 thousand euro):
• at a cost totalling 716 thousand euro for the creation of a MV/LV transformer room at the Porcari site;
• creation of the new organisation of the Milan gallop race track (755 thousand euro);
• organisation of the Milan trot race track (45 thousand euro);
• improvements to the electrical and water system at the Milan race tracks (275 thousand euro);
• acquisition of transformers for the transformer rooms at the Milan race tracks (81 thousand euro);
• acquisition cost of instrumental assets (servers, printers, PCs and monitor) for performing the various activities of the group
companies and incrementing operations on the various building systems owned by the Group;
• the value of capitalised assets related to lease-back transactions for a total of 13,797 thousand euro.
• the other assets item for 4,857 thousand euro mainly refers to purchases of furniture delivered on loan in the new shops and
corners (Bersani licences).
Financial charges were not capitalised in property, plant and equipment.
pag
168
16. INTANGIBLE ASSETS
The amount of intangible assets at 31.12.2007 totalled 461,315 thousand euro (376,552 thousand euro), differences for the
period are due to the combined effect of amortisation for the period totalling 31,851 thousand euro and investments for 116,614
thousand euro.
thousands of euro
Goodwill Consolida- Concessions, Develop- Industrial
tion
licences,
ment
patent
difference trademarks
costs
rights
and
and use of
similar
original
rights
works
Cost
33.099
Acquisitions following business combinations 213.231
Reclassifications
223
Other increases
Decreases
246.553
Reclassifications
Other increases
Decreases
246.553
Impairment
Disposals
Reclassifications
Amortisation for period
Impairment
Disposals
Reclassifications
Carrying amounts
At 1 January 2006
At 31 December 2006
At 31 December 2007
21.810
686
2.221
172.727
Current
assets
4.759
-
686 209.617
4.138 11.004
245
1.300 10.106
3.506
34.661
1.985
23.844
531
151
2.753 10.868
1.385
279
136
430
369
1.579 10.536
3.875
0
-3
21.810
245
25.826
31.001
21.810
11.289
224.743
224.743
pag
Total
53.704
385.958
-223
0
210
903
-139
-142
4.607
440.423
486 79.946 116.614
5.093 79.946 557.037
11
-3
686 174.956
2.222 10.717
Others
245
56.827
399
155
296
1.978 10.691
4.171
441
236
922
441 149.130 1.174
441 152.790 2.160
169
611
332
313
1.253
732
922
0
0
38.952
0
24.922
0
-3
0
63.871
0
31.851
0
0
0
95.722
14.752
- 376.552
79.946 461.315
Investments at 31 December 2007, totalling 116,614 thousand euro, are mainly composed of:
• 79,946 thousand euro entered in current assets, of which 79.905 thousand euro paid to AAMS for licences which are not
yet operative. The total amount paid to AAMS for awarding of 1,206 sports licences (342 shops and 864 corners) and 3,886
as well as the awarding of a concession for remote horse race gaming and one for sports, following the participation in the
call for tenders called by the Ministry of the Economy and Finance to apply the Bersani decree, totals 113,944 thousand euro;
• 34,661 thousand euro entered in the “concessions, licences, trademarks and similar” of which 34,188 thousand euro related
to the value paid for the new licences which have started bet acceptance activities, mainly due to the effect of airing the new
horse racing or sports licences with the old only horse racing or only sports concessions active in already operative BAP;
• 1,385 thousand euro for the development of Betsi 2006, Videa, corner furnishing prototypes and for upgrading of gaming
software to the new sports bet acceptance protocol, established by AAMS which became effective as of 2 April 2007, as
well as the odds display systems;
• 622 thousand euro entered in the “industrial patent rights and use of original works” and “other” for corporate software upgrading
investments.
The item concessions includes what is related to the acquisition of 450 horse racing and sports concession company branches,
the effects of which started 16 March 2007 and the portion of the payment related to the new sports and horse racing licences
which are already active (as described above) that are amortised based on the duration of the concession.
Financial charges were not capitalised in intangible assets.
The goodwill existing at 1 January 2006 mainly refers to the goodwill net amortisation, from SNAI Servizi Spazio Gioco S.r.l.,
merged with SNAI S.p.A. in 2002 (10,769 thousand euro), related to the betting segment.
The consolidation difference totalling 441 thousand euro including 368 thousand euro related to the betting segment, recognised
in the parent company’s balance sheet under goodwill and totalling 11,137 thousand euro which represents the sum of the two
amounts related to the betting segment, reported in the consolidated financial statements.
As mentioned above, the company decided not to apply IFRS 3 – business combinations – retrospectively to combination transactions
occurring before transition to the IFRS. Consequently, the goodwill from SNAI Servizi Spazio Gioco S.r.l., was entered during the
transition to the IFRS, at the net carrying amount determined according to the previous applied accounting standards (Italian
accounting standards).
This goodwill, which was completely allocated to the Cash Generating Unit (“CGU”) “computerised activities – services” (Services
Division), as required by IAS 36 was subject to an impairment test at 31 December 2007.
In particular, in compliance with the above standard, the recoverable value of goodwill was estimated based on a measurement
method founded on prospective cash flows, assumed from the 2008-2012 industrial plan approved by the Board of Directors,
by applying an average weighted cost of capital (gross WAAC), totalling 7.58%.
The WACC, resulting from the use of a risk free sample totalling 4.40%, a beta unlevered totalling 0.81 and an equity risk premium
(ERP) of 5%. The nominal cost of shareholding capital totals 8.5%.
The cost of third party capital, totalling 6%, taking into account a risk-free investment yield rate totalling 4.40%, of a levered debit
premium of 1.60%. The financial structure deemed sustainable (and at full-steam) in determining the discount rate. The estimate of
future cash flows is in line with past results and the competitive and regulator y scenario for the segment.
The recoverable value of goodwill estimated in this manner is higher than its total carrying amount, totalling 11,137 thousand
euro.
In addition the external and internal information sources, provide indications to not reduce the value. The changes during the period
or in the near future in the technological, economic, legal or market context where the company operates or the market is business
is geared to, can only be favourable.
With reference to the acquisition of concession company branches finalised on 3 April 2006 and with effects as of 16 March
2006, SNAI S.p.A. applied IFRS 3 (“Business Combinations”). SNAI S.p.A. acquired 450 company branches in 2006, operating
in 218 sports concessions and 232 horse racing concessions. With reference to each agency SNAI acquired the company branch
strictly involving the concession ownership.
Based on IFRS 3 (“Business Combinations”) the Concessions have been recognised in intangible assets at their fair value. The value
of the Concessions, identified when the paid price was allocated, is amortised on a straight-line basis until their original expiration.
As required by IAS paragraphs 11 and 12, goodwill resulting from the concession company branch acquisition transaction was
subject to an impairment test at 31 December 2007.
pag
170
During 2008 an additional 8 company branches were acquired resulting in direct management of another 5 sports concessions
and 3 horse racing concessions for SNAI.
Following the call for tenders to award licences for opening new points of sale, in compliance with the provision converting legislative
decree no. 223 of 4 July 2006 into law, SNAI was awarded the concessions for collecting bets. In particular a sports concession
with payment of acquired licences for ¤ 67.8 million (342 sports shops and 864 corners) and a horse racing concession with
payment of acquired licences for ¤ 45.6 million (99 horse racing shops and 3,787 corners).
In addition it was awarded the concession for remote horse racing gaming with the payment of acquired licences for ¤ 0.3 million
and the concession for remote sports racing gaming with the payment of acquired licences for ¤ 0.3 million. Therefore, SNAI
was the operator who obtained the greatest number of awards among all the participants.
Moreover, on 17 November 2007, a right was acquired for a sports concession (shop) for ¤ 123 thousand.
These new licences will be added to the sports and horse racing concessions acquired by SNAI in March 2006 operative in the
current sales shops, thus allowing the company to maintain its leadership in the betting segment, both in terms of number of points
of sale and collected volumes.
Within the new points, whose opening is scheduled to be completed by the end of spring 2008, SNAI conducts a bet collection
and acceptance business using the structure, know-how and professionalism already used in the operative company branches
acquired in march 2006.
The management of bet acceptance and collection will be centrally handled by SNAI, which determines the acceptance policies
and marketing, advertising, human resources policies (even if all the points of sale directly handle and will handle hiring and working
relations with the employees for supplying the service).
The performance of the activities shows a coordination and results significantly higher due to the effect of the central management
and thus minimisation of the risk connected with geographic diversification of operation, collection and acceptance of bets.
Thus all of the points of sale will be managed in the same manner. The activity connected with the amusement machines located
in the points of sale shall take advantage of the territorial positioning of the concessions as well.
The acceptance policies are centrally handled in order to minimise the risk connected with geographical diversification of bet
collection and acceptance.
Moreover, due to the effect of management centrally handled by SNAI the direct and indirect benefits resulting from the acquired
concessions and those resulting from the awarded licences, give reason to believe that no point of sale generates revenue separate
from the other points of sale.
Based on application of IAS 36 – paragraph 81 the lowest level inside the entity has been identified where goodwill can be
allocated and coinciding with the combination of the cash generating unit with reference to the entire Concessions Division.
This was also following the consideration that company management controls operations of the collection activity in the Division
in question and makes decisions based on the activities as a single entity and single product line.
In the case in hand, the recoverable value of goodwill, as well as intangible assets not yet available for use, was estimated based
on a measurement method founded on prospective cash flows, assumed from the 2008-2012 industrial plan approved by the
Board of Directors, by applying an average weighted cost of capital (gross WAAC), totalling 8.64%.
The recoverable value needs to be adjusted by the discounting of the possible sales price of the cash generating unit (points of
sale) taken individually and as a whole (terminal value).
Thus it was necessary to add to the discount calculation the possible transfer price of the reference target entity (cash generating
units) identified in the continual cash flow yield attributed to the last forecast year.
As test method, the hypothesis was considered of measuring the terminal value by extracting projections based on the Industrial
Plan using a stable growth rate for the years after 2012 and an abatement percentage connected to the probability of concession
and/or right renewal. It is impor tant to note that the percentages used are extremely precautionar y.
As for the impairment test discussed above, in terms of the goodwill allocated to the “CGU” “computerised activity – services”,
the discounting rate resulting from the use of a risk free sample totalling 4.40%, a beta unlevered totalling 0.81 and an equity
risk premium (ERP) of 5%. The nominal cost of shareholding capital totals 8.5%.
The cost of third party capital, instead, with reference to the discussed “CGU” totals 9%, taking into account a risk-free investment
yield rate totalling 4.40%, and a levered debit premium of 4.60%.
The financial structure deemed sustainable (and at full-steam) in determining the discount rate.
The recoverable value of goodwill estimated in this manner, as well as intangible assets not yet available for use, is higher than
its total carrying amount.
pag
171
Moreover, the estimate of future cash flows is in line with the competitive and regulatory scenario for the segment.
operates or the market is business is geared to, are estimated to be favourable.
Lastly, external and internal information sources provide indications to not reduce the value.
17. EQUITY INVESTMENTS
The group holds equity investments in the following companies:
Carrying
amount at
31/12/2007
thousands of euro
Non-controlling associates and subsidiaries
SOCIETA’ GESTIONE CAPANNELLE SPA
- ALFEA S.p.A.
- CONNEXT S.r.l.
- Solar s.a.
- LA TELEVISIONE S.r.l. in liquidation
- TESEO S.R.L. in liquidation
- RISTOMISTO S.r.l. in liquidation
Total equity investments measured at equity
Others
- TIVU+ S.p.A. in liquidation
- CONNEXT S.r.l.
- TELEIPPICA S.r.l. ( former SOGEST Società
Gestione Servizi Termali S.r.l.)
- LEXORFIN S.r.l.
Total equity investments in other companies
Carrying
amount at
31.12.06
Percentage held
31/12/2007 31/12/2006
533
1,582
21
0
0
0
2.136
0
1,331
17
9
0
0
0
1.357
26.67
30.70
0
30
0
70
100
26.28
30.70
25
30
84.46
70
100
0
10
0
-
19.5
15
19.5
0
496
46
552
496
46
542
19.5
2.44
19.5
2.44
On 5 June 2007 the extraordinary shareholders’ meeting of the Società Gestione Capannelle S.p.A. shareholders voted,among
other things, to cover the losses to 31 March 2007 which totalled 1,932,710.00 euro by:
•
•
•
•
zeroing out the share capital totalling 1,890,000.00 euro;
use of the legal reserve for 12,048.00 euro;
use of the extraordinary reserve for 27,066.00 euro;
payment by shareholders in proportion the shares possessed by each one for 2,796.00 euro;
In
•
•
•
addition, the shareholders’ meeting also voted:
to reconstitute share capital to 1,956,000.00 euro;
to reconstitute the extraordinary reserve to 41,204.00 euro;
that the shareholders who could have exercised the option right by 20 July 2007 and by 5 August the subscribers would have
had to exercise the pre-emption right on any uncalled shares; to consider effected the increase ins hare capital up to the amount
hat will have been subscribed at that date and to hereby modify article 5 of the articles of association regarding share capital;
• that the part of share capital exceeding the payment at the time of subscribing the share capital of 2.5/10 should be paid
by the shareholders: 35% by 31 October 2007 and 40% by 15 December 2007 – as promptly performed.
On 19 July 2007 SNAI S.p.A. subscribed 1,713,478 shares at 0.3 euro with simultaneous payment of 2.5/10 of the sum
totalling 128,510.85 euro and 11,563.2 to cover the losses. Moreover, subsequently SNAI S.p.A. subscribed and paid its
uncalled portion totalling 2,090.23. At 31 December 2007 SNAI had paid its part of the share capital increase, therefore
the equity investment of SNAI S.p.A. in Società Gestione Capannelle S.p.A. now totals 26.67%.
On 28 June 2007 the shareholders’ meeting of the subsidiary La Televisione S.r.l. in liquidation was held; it approved the final
liquidation financial statements prepared at 28 June 2007 and on 23 July 2007 the company was stricken from the business
registry.
pag
172
SNAI programmed the sale of 10% of the equity investment in Connext S.r.l. therefore the remaining 15% was reclassified in other
companies and measured at cost (equivalent to shareholders’ equity of the previous year) and the 10% was reclassified in availablefor-sale assets and measured at cost (equivalent to shareholders’ equity of the previous year), since it was less than the estimated
sales price (fair value).
The table below shows the values of the assets, shareholders’ equity, liabilities, income and profit or loss related to the most significant
associates: For Alfea S.p.A. the data are from the draft financial statements for 2007.
(thousands of euro)
Assets
7,966
Other liabilities
5,154
2,812
Total Liabilities and shareholders’ equity
7,966
Revenue
5,138
Profit for year
531
The complete composition of the group and adopted consolidation methods are described in Attachment 1.
18. PREPAID TAX ASSETS AND DEFERRED TAX LIABILITIES
The total amount of temporary differences and fiscal losses carried forward is described in the tables below, together with the related
theoretical amount for prepaid and deferred taxes as well as amounts recorded in the accounts:
Prepaid tax assets
Amount
Taxed bad debt provision
9.088
Provision for risks
7.422
Provision for warehouse write-downs
3.371
Difference between balance sheet
value and tax value of property,
plant and equipment
16.989
Accessory charges on share capital increase 7.821
1.732
Total
Previous fiscal losses carried forward
Rate
Tax effect
Prepayments
recorded
Reversal period
27,5%
27,5%
31,4%
2.499
2.041
1.058
2.499 2008 and subsequent
31,4%
31,4%
27,5% - 31,4%
5.335
2.456
546
546 2008 and subsequent
46.423
Amount
Rate
13.935
13.935
Tax effect
Benefits
recorded
Useable by
FESTA S.r.l.:
2000
2001
2002
Total previous losses
516
1.533
663
27,5%
27,5%
27,5%
142
422
182
142
422
182
2.712
746
746
2.712
746
746
Total prepaid taxes
unlimited reporting
unlimited reporting
unlimited reporting
14.681
The directors of SNAI S.p.A. decided to record the prepaid taxes generated for all temporary differences between the balance
sheet values and tax values of the related assets/liabilities based on forecasts of positive results for the current year and future ones.
The subsidiary Festa S.r.l. has entered all the tax benefits resulting from losses.
The increase in prepaid taxes of 3,603 thousand euro, compared to 31 December 2006, is due to the combined effect of
recognition of prepaid taxes with the reversal of prepaid taxes generated in previous periods.
pag
173
This change was also influenced by the reduction in the rate required by Law no. 244 of 24 December 2007 which entailed a
reduction of the IRES rates (from 33% to 27.5%) and IRAP (4.25% to 3.9%).
Moreover, the expected tax benefit resulting from fiscal losses carried forward, generated in previous years, was entirely used.
For the three year 2006-2008 period the company, as consolidating company, opted for the national tax consolidation as per
articles 117 et seqq. Presidential Decree 917/1988; as consolidated companies Trenno S.p.A. (later merged), Festa S.r.l., Mac
Horse S.r.l. and Immobiliare Valcarenga S.r.l. opted to take part in this option. As of the 2007 tax period Trenno S.r.l. was added
to the fiscal consolidation.
The adoption of the fiscal consolidation may entail some beneficial effects on the Group’s tax charge, including:
• the immediate use, with total or partial, of period tax losses of the companies taking part in the consolidation decreasing the
income possessed by the other consolidated companies;
• exclusion from taxes of dividends distributed between the companies participating in the consolidation of the same year;
• the possibility, according to certain conditions to transfer assets, other than productive ones of revenue or exempt capital gains,
in a continuous regime of fiscal values between companies which have exercised the group taxation option.
In the accounting situation under discussion, the company, due to the effect of taxable incomes or transmitted losses, recognised a
receivable due from the consolidated companies Mac Horse s.r.l., Immobiliare Valcarenga S.r.l. and Trenno S.r.l. of 501 thousand
euro; in fact, the company, as consolidating company is required to pay the balance and advance of IRES due based on the
consolidated income tax return.
Based on existing agreements, the excess previous tax carried forward or resulting from income tax returns filed by the companies
which opted for the consolidates can be used by the parent company only upon specific request. The transfer of money for the
payment of taxes on taxable income transferred to the consolidating company is regulated by inter-group current account with
debiting on the payment deadline date for the aforesaid taxes.
For the time being payment of sums between the companies which exercised the option for any received or attributed tax advantages
is not required.
Moreover, since the consolidated companies are companies subject to the management and coordination of the consolidating
company, the advantages (or disadvantages) resulting from certain consolidation adjustments are attributed to the consolidating
companies.
The tax liability of the consolidated companies to the tax authority remains unchanged in the event that a higher taxable income is
assessed for the parent company for errors in the taxable income communicated by the subsidiaries.
Lastly, SNAI S.p.A. as consolidating company and Trenno S.p.A. (now merged with the consolidating company) have opted for
a neutrality system for inter-group transfers in accordance with article 123 of the Tax Act related to the transfer from Trenno to SNAI
of the Milan San Siro trot race track and the Montecatini Terme trot race track which took place in March 2006.
Consequently, due to the effect of this option the Group benefited from the “sterilisation” of the fiscal capital gain caused by this
transfer totalling around 32 million euro. Naturally this neutrality scheme shall be terminated if there is a later transfer not in a
neutrality scheme or in the event of interruption or failure to renew the national consolidation scheme.
Provision for deferred taxes
Amount
Rate
Tax effect
Deferred
Tax amortisation of goodwill
(8,687)
(977)
Tax amortisation of company branch goodwill
(21,077)
fiscal value of determined payables due to AAMS
and payables due to BAP for concession acquisition (7,366)
Difference between balance sheet value
and tax value of concessions
(57,453)
Difference between balance sheet value and tax
value of property, plant and equipment
(44,061)
(1,451)
31.40%
27.50%
31.40%
(2,728)
(269)
(6,618)
(2,728)
(269)
(6,618)
27.50%
(2,026)
(2,026)
31.40%
(18,040)
(18,040)
31.40%
31.4% - 27.5%
(13,835)
(450)
(13,835)
(450)
(43.966)
(43.966)
Total defered taxes
(141.072)
pag
174
The directors of SNAI S.p.A. decided to record the deferred taxes generated for all temporary differences between the balance
sheet values and tax values of the related assets/liabilities. In particular, the acquired company branches, as business combinations
are accounted for by applying the IFRS 3 acquisition method.
Therefore, the company recognised assets and liabilities identifiable in the acquisition at related fair values at the acquisition date
and thus recognised goodwill only after having allocated the acquisition cost as described above. The value of concession licences
entered in the balance sheet differs from the cost cited in the contract: the statutory balance sheet amortisation differs from the tax
amortisation as per article 103, paragraph 2, Presidential Decree 917/1986 from which the deferred taxes. The goodwill value
is not amortised by annually subject to impairment testing: tax amortisation is disciplined by article 103, paragraph 3, Presidential
Decree 917/1986 from which the deferred taxes.
The decrease in the provision for deferred taxes of 7,980 thousand euro, compared to 31 December 2006, in addition to the
combined effect of recognition of deferred taxes and reversal of deferred taxes generated in previous periods, is mainly due to
the reduction of the rate under Law 24 no. 244 of 24 December 2007 which entailed a reduction in IRES (from 33% to 27.5%)
and IRAP (from 4.25% to 3.9%) rates.
19. INVENTORIES
Compared to 31 December 2007 the item decreased by 196 thousand euro. The table below shows the breakdown of inventories:
thousands of euro
31.12.07
31.12.06
Change
Raw material
1,375
504
12,355
5,979
5,399
3,052
-4,604
-4,895
9,303
Total
14,234
14,430
-196
Finished products/goods include inventories for spare parts for 27 thousand euro (81 thousand euro). The variation in raw materials
is attributable to the use of materials for the production of new gaming terminals (PUNTO SNAI WEB SMALL, LARGE, BiBest and
BETSI 2006); the increase in finished products is attributable to the produced terminals and acquisitions, effected during the year,
machines for setting up new points (shops and corners both in direct management and customer licensees).
The goods for setting up the new points of sale will be sold or delivered on loan based on the selection of the managers of the
new points: if the loan is selected the consequent decrease in inventories will generate an increase in property, plant and equipment
for the same amount under plant and machinery.
The value of inventories is recorded net of the provision for warehouse write-down which, at 31 December, totals 3,199 thousand
euro (3,532 thousand euro). The table below shows the movement in the provision for warehouse write-down.
31.12.2006
Raw material
Total
709
265
2,558
3,532
Accrual
Uses
0
-13
-10
-138
-161
Reclassification
31.12.2007
-172
-172
696
255
2,248
3,199
20. ACCOUNTS RECEIVABLE
Receivables increased by 5,076 thousand euro, rising from 52,106 thousand euro at 31 December 2006 to 57,182 thousand
euro at 31 December 2007.
The table below shows there breakdown:
thousands of euro
Current accounts receivable
- customers
- stables, jockeys and bookmakers
- UNIRE
- due from other slot manager customers
- Direct debit due from Slot customers
- due from sister companies
- due from associates
- slot customer direct debit
- Notes receivable for collection and in portfolio
- bad debt provision
Total
31.12.07
31.12.06
Change
39,603
894
6,233
45,933
774
2,264
0
851
6
44
0
0
6,693
-4,459
52,106
-6,330
120
3,969
9,921
58
0
6,847
-6,374
57,182
pag
175
9,070
-6
14
0
154
-1,915
5,076
Accounts receivable due from customers include, among others, receivables due from managers for entertainment machines (Slot
machines) for 20,050 thousand euro (33,383 thousand euro at 31.12.06). Receivables for presentation of Rid on sight from Slot
customers total 9,921 thousand euro (851 thousand euro).
Receivables due from customers and direct debit from Slot customers include the balances of Slot gaming at 31 December net of
compensations recognised for the manager (third party assigned with collection) and operator, which mature on a fifteen day basis
with “immediate” due date; they also include withholding balances due to AAMS – Amministrazione Autonoma Monopoli di Stato
and calculated at 12% of the gaming movement entertainment machines.
The receivable due from UNIRE totalling 6,233 thousand euro includes some entries related to previous receivables, in addition
to grants for the so-called customisation of the metropolitan race tracks for the years 2005 to 2007, invoices for fees for the month
of December and receivables for payments for ippica nazionale and television filming.
The bad debt provision was determined considered the amount of doubtful receivables.
The directors believe the provision is suitable for facing estimated losses on future receivables. Accounts receivable include notes
to collect for 6,847 thousand euro (6,693 thousand euro) recorded net of interest charge on future due dates and previously
received from slot customers following the definition of instalment payments agreed upon following credit collection actions. The
change in the bad debt provision is shown below:
thousands of euro
Individually
written down
2,072
106
2,074
-477
At 01 January 2006
Accrual for year
Reclassifications
Use of provision
Collectively
written down
740
326
-342
-40
Total
2,812
432
1,732
-517
At 31 December 2006
3,775
684
4,459
Accrual for year
Reclassifications
Use of provision
1,062
400
-13
0
0
529
-63
0
0
1,591
400
-76
0
0
At 31 December 2007
5,223
1,151
6,374
At 31 December 2007 the analysis of accounts receivable due bit not written down was as follows:
Du but not written down
in thousands euro
Not due in
0 - 90
90 - 120
> 120
bonis
giorni
giorni
giorni
Totale 2007
57.182
38.626
2.397
2.968
13.191
Totale 2006
52.106
25.538
6.748
14.995
4.825
21. OTHER ASSETS
Noncurrent assets, classified as other non-financial assets are composed as follows:
thousands of euro
31.12.07
31.12.06
Change
62
73
54
189
72
73
54
199
-10
0
0
-10
211
383
173
211
556
-383
38
0
-345
1,793
1,793
2,193
1,304
1,304
2,059
489
489
134
Other non-current assets
Tax Assets
- for refunds
- for disputed taxes
- for equity taxes
- receivable security deposits
- bad debt provision on sister company receivables
Due from customers:
- notes receivable in portfolio
pag
176
Notes receivable totalling 1,793 thousand euro (1,304 thousand euro) are the notes due beyond the year received from customers
for the definition of established repayment plans and entered at current value.
Other current assets consist of:
vthousands of euro
31.12.07
31.12.06
Change
1,018
2,200
48
29
375
1,346
81
73
643
854
-33
-44
3,295
1,875
1,420
727
1,279
0
339
1,518
360
705
50
80
3,149
3,313
2,904
8,940
130
3,571
1,574
-2,984
478
1,130
30
416
1,518
360
0
49
369
2,201
3,993
1,848
0
16
1,466
-3,384
249
149
-30
-77
0
0
705
1
-289
948
-680
1,056
8,940
130
3,555
108
400
25,655
10,490
15,165
16
5,355
18
4,569
-2
786
5,371
4,587
784
34,321
16,952
17,369
Other current assets
Tax Assets:
-
Income tax prepayment
IRAP prepayment
Other receivables due from tax authority
Income taxes on termination benefits Law 140/97
-
Other receivables
Social security institutions
Receivables due from Tris Associates
Receivables from sale of shares
Receivables due from Linkage
Receivables from reversal of fees on sureties
Receivable security deposits
Receivables from AAMS positions for company branch acquisition
Receivables due from SNAICARD and SNAICARD circuto Gold points
Receivables from betting licensee activities
Direct debit due from others
Receivables due from AAMS for SLOTs
Slot Operators for PREU
Advance on AAMS concession fee
Receivables on event outcome contests
Bad debt provision due from others
Accrued income and prepaid expenses
- Accrued income
- Prepaid expenses
The receivable due from AAMS for 8,940 thousand euro is related to the grant for recognising 0.5% on the gaming movement
generated by amusement machines paragraph 6 (Slot machines) which by law must be reversed from the AAMS concession fee
to the benefit of the network licensees as better described in note 4 “revenue from sales and ser vices”.
The receivables for betting licensee activities (due from BAP) for 3,313 thousand euro (3,993 thousand euro) are related to the
management contract for accepting bets for the Concessions acquired and contracts stipulated with corner and shop managers
for activation of the new Bersani licences.
These receivables accrue on a daily basis and are settled weekly, by subtracting the bets collected at agencies, amounts of tickets
paid and reimbursed, fee recognised to the manager and the difference from withdrawals and deposits made via the Punto SNAI
cash register on SNAICards from the net movement.
Direct debit due from others presented with at sight due date total 2,904 thousand euro, of which 2,625 thousand euro related
to management contracts as described in the previous point and 279 thousand euro attributed to the Circuito Gold.
The advance on concession fee item totalling 3,571 thousand euro contains the amount paid to AAMS in July 2007 as an advance
on the concession fee for the so-called Bersani licences and balanced in January 2008 with the payment of the first advance for
the subsequent year as required by the Convention.
pag
177
Receivables for positions due from AAMS with a balance of 80 thousand euro (369 thousand euro), are the result of the different
between payables due to AAMS conferred with the Concession company branches, calculated net of the credit entries and the
greater deposits made following the requests of AAMS which had not taken into account the credit position of some Concessions
while waiting to acquire the documents supporting such positions.
Prepaid expenses include:
3,477 thousand euro related to advance payments for surety fees and insurance premiums, of which 2,347 thousand euro referred
to fees paid to UniCredit Banca Mobiliare S.p.A. for opening of credit expiring on 31 December 2016, aimed at the release of
the sureties, up to the maximum value of 140,000 thousand euro;
1,878 thousand euro related to maintenance, consultation and operating lease contracts.
The change in the bad debt provision is shown below:
thousands of euro
written down individually
At 01 January 2006
Accruals for the year
Reclassifications
Use of provision
4,726
463
-1,732
-73
At 31 December 2006
3,384
Reclassifications
Use of provision
written down Collectively
4,726
463
-1,732
-73
0
0
-400
At 31 December 2007
Total
3,384
0
-400
0
0
2,984
0
2,984
22. FINANCIAL ASSETS
The table below shows the breakdown for financial assets:
thousands of euro
31.12.07
31.12.06
Change
0
0
145
145
-145
-145
Financial current account income due from parent company
74
Financial current account income due from subsidiaries
2,032
Financial current account income due from companies
subject to control by the same parent company
2,539
Banca Popolare Italiana warrant
6
15,238
Former Società Fiorentina Corse Cavalli
shares for merger swap
1
Total current financial assets
19,890
29
1,719
45
313
1,344
16
0
1,195
-10
15,238
1
3,109
0
16,781
BTP 5% due 01.05.2008
Total non-current financial assets
Financial current account income due from subsidiaries is related to Teseo S.r.l. in liquidation for 1,756 thousand euro, Ristomisto
S.r.l. in liquidation for 947 thousand euro and are entered net of the bad debt provision totalling 671 thousand euro. The provision
for write-downs is attributed to the receivable due from Ristomisto S.r.l. in liquidation for 639 thousand euro and from Teseo S.r.l.
in liquidation for 32 thousand euro.
Financial current account income due from companies subject to control by the same parent company are related to Tivu + S.p.A.
in liquidation for 1,665 thousand euro and Teleippica S.r.l. for 874 thousand euro.
The balances of financial current accounts include interest accruing in the period, calculated at the Euribor rate at three months
plus five percentage points.
The asset management account is composed of securities which can be immediately converted to cash.
pag
178
23. CASH AND CASH EQUIVALENTS
The table below shows the breakdown of cash and cash equivalents:
thousands of euro
31.12.07
31.12.06
Bank current accounts
Postal current accounts
Cash on hand
Liquid assets
92,978
26
83
93,087
262,694
20
107
262,821
Bank overdrafts
Net cash and cash equivalents as reported in the cash flow statements
0
93,087
0
262,821
24. SHAREHOLDERS' EQUITY
On 15 January 2007 the share capital increase was concluded voted on 14 September 2006 by the extraordinary shareholders’
meeting of parent company SNAI S.p.A., which had given the Board of Directors the power to perform as per article 2443 of
the Italian Civil Code, separate increases in share capital up to a maximum of 100,000,000 new shares. On 26 October 2006
the Board of Directors voted to ask for an increase which would make it possible to acquire financial resources up to 250 million
euro between nominal and share premium.
On 30 November 2006, CONSOB, the National Commission for Companies and the Stock Exchange, has issued its approval
for publication of the information prospectus required by article 5, second paragraph of the EC directive 71/2003 and article
24 of the EC regulation 809/2004 related to the offer as an option to ordinary share shareholders of SNAI S.p.A. and the Board
of Directors had voted to establish a maximum of 61,718,860 shares to issue in the context of the offering and to offer them under
option to the shareholders at a unit price of 4.05 euro, including the nominal value, totalling 0.52 euro and share premium at
3.53 euro. The new shares were offered as an option based on a ratio of 28 shares for every 25 shares held. At the end of the
subscription period (4 – 21 December 2006) 54,581,100 share rights had been exercised at 61,130,832 ordinary shares of
SNAI S.p.A., totalling 99.05% of the shares of the Offering for a value of 247,579,869.6 euro. A total of 27,927,750 of these
rights, corresponding to 31,279,080 ordinary shares, totalling 50.68% of the total number of shares of the offering, were exercised
by the parent company SNAI Servizi S.r.l. The uncalled shares totalling 525,025 were offered on the Stock Exchange by the
company, as required by article 2441 paragraph 3 of the Italian Civil Code, through UniCredit Banca Mobiliare S.p.A. from 8
to 12 January 2007.
The option rights were all sold and exercised through the subscription by the final deadline of 15 January 2007, for 588,028
newly issued shares for a value totalling 2,381,513.40. Thus the transaction was concluded on 15 January 2007 with the complete
subscription of the 61,718,860 shares offered for a total value of 249,961,383.00 euro. On 12 February 2007 the SNAI S.p.A.
share capital increase was filed with the Lucca Chamber of Commerce as document M07212L2120 for a nominal total of
60,748,992.20 euro, equal to a total of 116,824,985 ordinary shares with a nominal value of 0.52 euro each, upon completion
of the debiting of the amounts related to the subscriptions.
The share capital of parent company SNAI S.p.A. at 31.12.2007 entirely subscribed and paid-up amounted to 60,748,992.20
euro (at 31 December 2006 60,443,321.04 euro) and is composed of 116,824,985 ordinary shares (116,236,957 ordinary
shares at 31 December 2006).
nominal value in euro
116,824,985
116,824,985
0.52
The table below shows a reconciliation between the number of shares in circulation at the beginning the year and at the end of
the period.
Number of shares
116,236,957
588,028
116,824,985
The issued shares are all ordinary shares without any constraints or preferences.
There is no treasury stock held directly by the parent company SNAI S.p.A. or through its subsidiaries or associates.
pag
179
Reserves
Reserve for premium on shares
The share premium reserve, totalling 211,319 thousand euro, was established with the share capital increase, as described above,
for 219,535 thousand euro minus the accessory charges net of the fiscal effect related to the increase in share capital for 8,216
thousand euro, as required by IAS 32. The increase for the period totalling 2,364 thousand euro is related to the conclusion to of
the share capital:
The increase for the year totalling 2,364 thousand euro is related to the conclusion of the share capital increase: 3,743 thousand
euro of share premium minus accessory charges for 1,379 thousand euro.
Reserve for asset revaluation Law 72 of 19/03/1983 and Law 413 of 30/12/1991
At 31/12/2006, as a consequence of the merger of the subsidiary Ippodromi San Siro S.p.A. (formerly Società Trenno S.p.A.)
with SNAI S.p.A, retained earnings were reclassified for 2,750 thousand euro: 899 thousand euro to the reserve for revaluation
of asset revaluation as per Law 72 of 19/03/1983, 1,850 thousand euro to the reserve for asset revaluation as per Law 413
of 31/12/1991 and 1 thousand euro to the translation reserve.
The shareholders’ meeting to approve the financial statements held on 15 May 2007 voted to cover the losses for 2006 entirely
using the reserve as per Law 413 of 31/12/1991 and for 142 thousand euro the reserve as per Law 72 of 19/03/1983.
Merger swap reserve
The reserve for merger swap, totalling 966 thousand euro, was established in 2006 with the merger of Ippodromi San Siro S.p.A.
(formerly Società Trenno S.p.A.) with SNAI S.p.A.
The accessory charges related to the merger transaction for the merger swap, totalling 113 thousand euro, were deducted from
retained earnings.
Extraordinary Reserve
The decrease for the year totalling 1,160 thousand euro is due to the different classification method and consequent recording of
a lease contract signed in 2006.
Minority interest
At 31 December 2007 the minority interest was zero since no subsidiary consolidated with the line-by-line method is held by others.
25. EARNINGS PER SHARE
Basic earnings standard share
The basic earning per share calculation at 31 December 2007 was performed considering the earning attributed to holders of
ordinary shares, totalling 8,519 thousand euro (31 December 2006: loss for 1,882 thousand euro) and the weighted average
number of ordinary shares in circulation during the year closed at 31 December 2007, totalling 116,800,819.47 (31 December
2006: 56,647,907.95).
The calculation was performed as follows:
thousands of euro
Earning (- loss) attributable to holders of ordinary shares = group profit for period (a)
Weighted average number of ordinary shares (b)
31.12.07
31.12.06
8.519
-1.882
116.800,82
Earning (- loss) per basic share (a/b)
0,07
56.647,91
-0,03
Diluted earning/loss per share
The diluted earning/loss per share is the same as the basic earning/loss per share since financial instruments with potential dilution
effects have not been issued.
26. TERMINATION BENEFITS
Termination benefits at 31 December 2007 totalled 5,433 thousand euro against 9,758 thousand euro at 31 December 2006,
the decrease of 4,325 thousand euro is mainly due to the reform of the Italian termination benefits (TFR) law which requires companies
with more than 50 employees to pay the part of accrued termination benefits to a fund selected by the individual employees.
The table below shows the movements of the provision:
pag
180
thousands of euro
Balance at 01.01.07
Accrual for the year
Uses
Curtailment
Financial Charges
Balance at 31.12.07
-
9,758
368
695
4,253
255
5,433
The termination benefits are considered a defined benefit plan to be accounted for according to IAS 39, by applying the projected
unit credit method, which entails estimating the amount to pay to each employee when he leaves the company and actualising
this payable based on a hypothesis on the times of leaving calculated using actuarial methods.
The assessment was performed with the support of an independent actuary.
The main assumptions adopted are summarised in the following table:
Summarisation of Economic – Financial Technical
Assumptions
Financial assumptions
December 2007
Annual rate of discounting back
Annual rate of inflation
Annual rate of termination benefit increase
4.70%
2.00%
3.00%
Summarisation of Demographic Technical Assumptions
Demographic assumptions
December 2007
Mortality
Disability
Age and sex
Retirement age
ISTAT 2000
INPS tables broken down by
Achievement of Obligatory General Insurance
Annual Turnover Frequency Table and Termination Benefit Advances
Company
Advance frequency % December 2007 Turnover frequency %
December 2007
SNAI S.p.A.
2.50%
5.00%
3.00%
1.50%
Festa S.r.l.
1.55%
12.00%
Mac Horse S.r.l.
3.00%
3.00%
27. FINANCIAL LIABILITIES
The table below shows the breakdown for financial liabilities:
thousands of euro
31.12.07
31.12.06
Change
Secured loans granted by banks (Senior Loan)
Secured loans (Junior loan)
Payable for horse racing and sports concession acquisition
IBM Financial Services Loan
Payables for finance leases
225,908
41,151
20,150
675
25,604
242,328
40,711
27,018
1,037
2,424
-16,420
440
-6,868
-362
23,180
Total other non-current liabilities
313,488
313,518
-30
Bank account overdrafts
Current portion of long term loans (Senior Loan)
18,593
Current portion of long term loans (IBM Servizi Finanziari Loan)
227
Bank account overdrafts
0
Payables due to other lenders
0
Payable for horse racing and sports concession acquisition
7,590
Payables for finance leases
5,793
11,772
359
0
0
15
41,746
818
0
6,821
-132
0
0
-15
-34,156
4,975
Total current financial liabilities
54.710
-22.507
32.203
pag
181
Financial payables include:
• loans taken out to acquire “concession” company branches (described in detail in the paragraphs below) entered at amortised
cost for a total of 285,652 euro, equal to a nominal 297 million euro recognised net of direct accessory charges. These
accessory charges include freelance fees connected to completion of the loan and register tax due when opening the loan;
the first instalment of the loan due 22 September 2007 was paid; while the instalment due 22 March 2008, totalling a nominal
19 million euro was entered in the “Senior loan within 12 months” item again net of accessory charges for an amount of
18,593 thousand euro and has been promptly paid;
• the payables due to BAP resulting from the acquisition of Concession company branches (Vendor loan), for the remaining
instalment rates existing at 31 December 2007. The acquisition transaction entailed the payment of a part of the payment to
pay at the time of signing the claim acts (March 2006) and the installation payments of the vendor loan in five annual installations
of an equal amount, the first due 30 May 2007, without paying the interest due from SNAI S.p.A. By the end of the month
of January 2007 some BAP, following signing of an additional agreement proposed by SNAI S.p.A, received early reimbursement
of the vendor loan at a value discounted at the rate of 6.8%. Subsequently on 30 May 2007 the first instalment of the remaining
extensions was reimbursed, consequently at year end the vendor loan was represented as follows:
-20,150 thousand euro equal to the current value of the extended payable due beyond 12 months for subjects which did not
sign the additional agreement;
-7,590 thousand euro related to the instalment of the existing extensions due in May 2008;
• the payable for the IBM loan for a total of 902 thousand euro related to the supplementary service contract with IBM Italia
S.p.A., signed based on the necessary implementation for setting up the new points for accepting bets;
• financial payables for lease contracts totalling 31,397 thousand euro refer to three contracts signed with the companies Locat
S.p.A., Ing. Lease Renting S.p.A. and IBM Finanziaria S.p.A. The subject matter of the contracts are the technologies to use
in the new bet acceptance points, better described in note 15.
In 2006 the parent company in order to obtain the financial resources necessary for acquiring company branches and for early
settlement of the remaining consolidated payable with banks, totalling ¤40.5 million in capital line occurring 29 March 2006,
and to increase its working capital, signed two loan contracts with its associates, namely with Unicredit Banca d’Impresa S.p.A.
(“Senior Loan Contract” and with Solar S.A. a Luxembourg company possessed at 70% by FCCD Limited, and Irish company and
30% by SNAI S.p.A: (“Junior Loan Contract” and with the Senior Loan Contract the “Loan Contracts”). Solar S.A. obtained the
financial resources necessary to pay the Junior Loan by issuing preferred equity certificates subscribed by third parties.
The Company and the lenders established – including by singing a so-called Intercreditor Agreement – that the Junior Loan Contract
be subordinate to the Senior Loan Contract and therefore that each payment due according to the Junior Loan Contract can be
paid to Solar S.A. only to the extent that all the payments have been paid due to Unicredit Banca d’Impresa S.p.A. based on the
Senior Loan Contract.
The financing granted based on the Senior Loan Contract (the “Senior Loan”) is divided into a tranche A up to 96.5 million euro
(“Tranche A”) and a tranche B up to 170 million euro (“Tranche B”).
The Senior Loan has a duration totalling five years, i.e. up to 15 March 2011. The interest rate applied to the Senior Loan is Euribor
at three months plus a margin which for Tranche A will be 2.75% annually and for Tranche B 5.15% annually. This margin can
be reduced by 0.25% for Tranche A and 0.5% for Tranche B if the Company reaches specific established levels in the ratio between
total net borrowing and annual EBITDA. In the latest payments the effective interest was calculated and charged with the adjustment
of the above margin, since the established levels were reached.
The Senior Loan Contract requires that Tranche A be repaid on an amortisation plan, with the exception of a pre-amortisation plan
for the first eighteen months. Thus the repayments for Tranche A will be paid at the eighteenth, twenty-fourth, thirty-sixth, forty-eighth
and sixtieth month from the date of first use, i.e. 21 March 2006.
Tranche B for the Senior Loan will be paid in its entirety at the due date of the Senior Loan and will be subordinate to complete
repayment of Tranche A.
On 21 March 2006 the Company asked for and obtained payment of a first part of the two Senior Loan and Junior Loan tranches
for a total amount of around 175 million euro (of which 23.7 million euro from the Junior Loan). The requested sums were obtained
with accreditation days of 21 and 24 March 2006, respectively.
On 31 March 2006 the Company asked for payment of the remaining 135 million euro for the two tranches of the Senior Loan
and Junior Loan: the payment was obtained in the first days of April 2006.
On 20 October 2006 SNAI S.p.A. obtained Waivers from the lenders to be able to sign a contract for a line of credit for guarantees
of 140 million euro needed for the call for tenders for new bet acceptance licences based on Italian Legislative Decree 223 of
04.07.2006.
Following what was established in the Waivers, SNAI has the right to repay the Senior Loan tranche A early starting from the second
anniversary of the first use until the third anniversary by paying some costs and a fee for early repayment totalling 2% of the early
repaid amount and 1% of the early repaid amount from the third to fourth anniversary. Any amounts repaid early after the fourth
year will only be subject to specific costs but not to fees.
pag
182
The loan granted based, on the Junior Loan Contract (“Junior Loan”), totals 43.5 million euro and has a duration of five years, i.e.
until 24 March 2011. The interest rate applied to the Junior Loan is Euribor at three months, plus a margin of 14.3% annually. In
the latest payments, this margin was reduced by 0.5% since the company reached the specific established levels in the ratio between
total net borrowing and annual EBITDA. The effective interest was calculated and charged with the adjustment of the above margin.
The Junior Loan will be entirely repaid at its due date and subordinate to the complete repayment of the Senior Loan.
Based on the Waivers, for this loan as well, the Company has the right to early repayment of the Junior Loan starting from 30 months
to the fourth year by payment of some costs and a fee for early repayment totalling 2% of the early repayment and 1% of the early
repayment in the fourth year. Any amounts repaid early after the fourth year will be subject to specific costs, but not to fees.
As customary with this type of loan, the Loan Contracts entail a series of obligations for the Company which, with the exception
of what is described above, are substantially the same for both Loan Contracts.
The Company has made a commitment to the lenders to comply with a series of financial parameters mainly connected to the trend
of EBITDA on a consolidated level and total net borrowing of the Company. Verification of compliance with these financial
commitments will be done on a quarterly basis. An analysis and comments related to the covenants are included in paragraph
37.2 of the explanatory notes to the consolidated accounting situation.
In particular, by means of example but not limited to, the Company is also committed to:
(i) provide the lenders updates on operations and consolidated accounts on a monthly basis as well as all quarterly and six month
reports and statutory financials statements as soon as they are available in accordance with applicable law, (ii) obtain and/or
maintain all the authorisations necessary for its compliance in accordance with contracts the Company is party to, (iii) act in
compliance with applicable laws and not establish (or act so as to establish) new guarantees and/or liens on Company assets
and other Gruppo SNAI components which out previous approval from the lenders, (iv) not transfer (or act so as to transfer) its assets
or those of other Gruppo SNAI components, for a value of more than 5 million euro, for the entire duration of the loans, except to
perform ordinary activity and at market terms and, any income realised is used to develop Company activities, etc.
The occurrence of any significant event, for example, (i) Company’s breach of the commitments assumed under the Loan Contracts,
(ii) declaration of insolvency by one of the Gruppo SNAI components, (iii) non-compliance for a value over the specifically agreed
ceilings, by any of the Gruppo SNAI components in related to the related borrowing, which is not immediately remedied if possible,
(iv) exit of any of the subsidiaries from Gruppo SNAI, (v) loss of licences, authorisations or service contracts which produce more
than the total Group turnover, which shall result in the forfeiture of the Company’s acceleration clause with the consequence that
the lenders in this case can ask for the immediate repayment of all the sums paid and not repaid up to that time.
In terms of the collateral backing the above loans, a mortgage has been established on SNAI S.p.A. property and, in particular,
on the property which is part of the Milan Trot area and real estate portfolio represented by the Montecatini Terme race track and
the property which is part of the Milan Gallop area.
In particular a first and second mortgage has been established on this property to back the two loan tranches granted by Unicredit
Banca d’Impresa as well as a third mortgage to back the loan granted by Solar S.A.
Other guaranties granted in favour of Unicredit Banca d’Impresa S.p.A. and di Solar S.A., all first and second, as represented
by:
(i) pledge granted by SNAI Servizi S.r.l. on SNAI S.p.A. shares it possesses, totalling 50.68% of the SNAI S.p.A. share capital;
(ii) pledge on the SNAI S.p.A. equity investments in the subsidiaries Festa S.r.l., Immobiliare Valcarenga S.r.l., MAC Horse S.r.l
and equity investment in Teleippica S.r.l.;
(iii) pledge on the current accounts of SNAI S.p.A., as well as pledge on the current accounts of Festa S.r.l. and MAC Horse S.r.l.
pag
183
28. PROVISIONS FOR FUTURE RISKS AND CHARGES
As of 31 December 2007 these totalled 7,437 thousand euro; the table below shows the break down of changes:
thousands of euro
Risks/write-down
on subsidiaries and
other equity investments
in liquidation
Slot machine
network renewal
(art. 19 –
specifications)
Civil disputes
and contractual
risks
Pension
benefits
Total
1.795
1.344
-197
0
824
1.029
2.642
17
824
10
3.681
-17
0
2.841
4.810
-197
0
-17
7.437
Balance at 31 December
Amounts used during the year
Amounts reversed during the year
Reallocated amounts
-10
2.932
Risks/write-downs on subsidiaries and other equity investments in liquidation
The risks/write-downs provision on group company equity investments in liquidation was established to take into account risks
associated their liquidation and represents the maximum amount that the company is willing to sustain to close the various proceedings.
This provision is composed of total accruals made in previous periods and what was accrued during the year to adjust the provision
for risks related to the subsidiary Teseo S.r.l. in liquidation for 394 thousand euro and sister company Tivù + S.p.A. in liquidation
for 950 thousand euro representing the estimated maximum charge for the liquidation process.
The provision is related to the accrued amount of the group exceeding the carrying amount of the equity investment in the company
whose shareholders’ equity is less than its carrying amount and is related to the following subsidiaries: RistoMisto S.r.l. in liquidation
for 207 thousand euro, Teseo S.r.l. in liquidation for 1,724 thousand euro and the sister company Tivù + S.p.A. in liquidation for
1,000 thousand euro representing the maximum estimated charge for the liquidation proceeding.
Use of the provision for risks for 197 thousand euro is due to closing of the liquidation of the La Televisione S.r.l. subsidiary.
Slot machine network renewal (art. 19 – specifications)
Moreover, in 2007 a provision was set up to accrue 824 thousand euro related to technological upgrading as required by article
19 of the “Specifications” for “assignment in concession of the activation and operation of the computerised management network
for legal gaming using amusement machines as well as connected activities and functions” from the starting date of the concession.
Civil disputes and contractual risks
Risks for civil disputes and contractual risks contain the total estimated amount to cover the remaining risk entries related to the
settlement of transactions and disputes with third parties, including of a fiscal, tax and contribution nature.
The provision is mainly represented by the remainder of disputes of the subsidiary Ippodromi San Siro S.p.A. (formerly Trenno S.p.A.)
merged with SNAI S.p.A., still in progress with the Florence INPS office for 890 thousand euro, Rax of Montecatini for 103 thousand
euro and the former White Horse employees for 32 thousand euro. The accrual for the period for 2,652 thousand euro is related
to:
• 11 thousand euro for interest on the dispute with the Florence INPS office;
• 2,641 thousand euro represents the total estimated amount to cover the remaining risk entries related to the settlement of
transactions and disputes with third parties, including of a fiscal, tax and contribution nature.
SNAI S.p.A., as licensee for the management of the computerised network for interconnection of amusement machines received
in June 2007 a notice from the Regional Public Prosecutor’s Office of the Region of Lazio Audit Office asking it to submit its own
deduction related to an enquiry on a possible tax offence.
The regional Public Prosecutor charged NSAI, along with three managers from the Autonomous Administration of State Monopolies,
with inexact fulfilment of some concession obligations and failure to comply with some ser vice levels.
After and with reference to the enquiry of the Regional Public Prosecutor, AAMS, with an act signed by one of the managers involved
in the proceeding started by the Public Prosecutor, served SNAI and all the other nine licensees with the same breaches, not
considering any evaluation on the point and as a precautionary measure. AAMS reserved the right to make a final decision following
pag
184
deductions presented by the concessions. SNAI S.p.A., as stated above, submitted its deductions within the deadlines disputing
the ground of the charges.
To this end, SNAI S.p.A. has already obtained legal opinions which confirm its position: the disputed sanctions are not applicable
and consequently the requested amounts are not due.
with service levels. SNAI S.p.A. is certain to have completely fulfilled its concession obligations, the most important being the
complete payment of the Single Tax Withholding (PREU) and concession fee.
The Board of Directors, including based on the legal opinions obtained, believe that no liability for the company has reason to
emerge from these proceedings, nor will there be negative results of an equity nature.
It is important to note that on 25 July 2005 the second session of the Lazio Regional Court, T.A.R. accepted the suspension request
submitted by SNAI against the administrative sanction, which ordered payment of penalties for around 4.8 billion euro;
The Lazio Regional Court held the hearing on 23 January 2008 and is waiting for publication of the ruling.
29. VARIOUS ACCOUNTS PAYABLE AND OTHER LIABILITIES
The various noncurrent accounts payable and other liabilities are composed as follows:
thousands of euro
31.12.07
31.12.06
Change
90
90
1,168
1,168
-1,078
-1,078
13,757
27
13,784
18,374
27
18,401
-4,617
0
-4,617
13,874
19,569
-5,695
Noncurrent various accounts payable and other liabilities
- due to INPS
Due to others:
- determined Payables due to Agencies
- payable security deposits
Total other non-current liabilities
pag
185
I The various current accounts payable and other liabilities are composed as follows:
thousands of euro
31.12.07
31.12.06
Change
7,480
6,163
6,436
107
620
64
20,870
30
2,426
7,696
83
462
402
11,099
7,450
3,737
-1,260
24
158
-338
9,771
713
1,078
274
178
11
294
2,548
559
898
253
0
249
1,959
154
180
21
178
11
45
589
1,143
20
662
16
2,400
1,237
1,297
1,293
201
1,119
921
5,076
427
9,852
5,011
113
11,248
13
42,049
173
5
3
-16
538
-365
-513
567
-201
267
626
-3,876
450
1,968
-558
119
-5,761
602
-5,972
40
120
160
15
795
810
55,267
5,198
Other current liabilities
Taxes payable
- for VAT
- for income taxes
- for single tax on bets
- for various tax liabilities and tax “amnesty”
- for employee Irpef
- for withholdings
- due to INPS
- INPS “amnesty”/injunction to pay
- due to ENPALS
- due to supplementary pension funds
- due to INAIL
- due to Previndail and others
Other current payables
- due to employees
1,316
- due to totalisator employees
25
- due to Sogei
665
- due to shareholders for dividends to collect
0
- due to others
2,938
- due to directors
872
- due to circuito gold BAP
784
- due to SNAI CARD customers
1,860
- due to others for Events Outcome contest winnings
0
- due to customers for winning and reimbursements on bets 1,386
- due to customers for accepted bets (antepost)
1,547
- due to AAMS for weekly balance
1,200
- security deposits
877
- PREU liability
11,820
- due to U.N.I.R.E. for totalisator and prescribed
4,453
- due to SOGEI for prescribed tickets
232
- determined payables due to agencies
5,487
- due to others for ippica nazionale winnings
615
36,077
Accrued expenses and deferred income
- Accrued expenses
55
- Deferred income
915
970
Total other current liabilities
60,465
Tax liabilities includes the current liability for single tax totalling 6,436 thousand euro accrued in the month of December on sports
and horse racing bets paid on 16 January 2008.
The other liabilities due to social security institutions includes a liability due to INPS related to an unfavourable ruling issued by the
Cassation Court in December 2004 on a dispute between INPS and the subsidiary Ippodromi San Siro S.p.A (formerly Società
Trenno S.p.A.), in relation to contributions for employees at the totalisator of the Milan horse race tracks, that, following acceptance
of the reduction of the fines and instalment plan, was accounted for in noncurrent payables for 90 thousand euro and in current
payables for 1,078 thousand euro.
For the payable due to Sogei, the company which administers betting data for the Ministry of Finance, 665 thousand euro is
composed of balances related to the second fortnight of December 2004 for an amount of 54 thousand euro and previous balance
entries for an amount of 611 thousand euro, referred to a payable originating from the reduction of the single tax rate for the period
from 1 January 2003 to 30 June 2004 and which totals 497 thousand euro for Milan and 114 thousand euro for Montecatini,
including interest as in the income tax form served in February 2006.
The other liabilities include payables due to AAMS for the suspended single tax and for the U.N.I.R.E. guaranteed minimums
accrued and conferred with the acquisition of the Concession company branches not yet due, in particular:
• 13,757 thousand euro (18,374 thousand euro), equal to the annual payments due starting from 31 October 2009 of payables
pag
186
for the U.N.I.R.E. guaranteed minimums accrued at the effective date of transfer of the company branches beyond 12 months,
discounted at 31 December 2007 at the rate of 7.3% which represents the market cost of financial instruments;
• 5,487 thousand euro related to the payments due within 12 months for the U.N.I.R.E. guaranteed minimums and for the
suspended single tax.
Payables were also recorded on acceptance of horse racing and sports bets in directly managed concessions following acquisition
of the Concession company branches related to:
- balance of SNAICard computerised gaming cards (1,860 thousand euro);
- payables recorded for collected bets up to 31 December and for which the events have not yet taken place (antepost betting)
for 1,547 thousand euro;
- payables due to bettors for accrued winnings not collected at 31 December 2007 (1,386 thousand euro) and ippica nazionale
winnings (615 thousand euro);
- payable due to SOGEI for the UNIRE horse racing withholding due for the second half of December and paid on 5 January
2008 (4,453 thousand euro);
- payable due to SOGEI for the winning and reimbursable tickets prescribed in December and paid on 5 January 2008 (232
thousand euro);
Other current payables include a net payable related to the single withholding (PREU), 11,820 thousand euro, calculated every
fifteen days on the movement of amusement machines (slot machines), starting 01 January 2007 the tax rate changed from 13.5%
to 12%.
At the 23 January 2008 due date the company had paid 13,226 thousand euro for PREU based on its counts on the existing
number of machines for the half month; the counts are not in line wit the AAMS counts.
During the first months of 2008 AAMS asked the company to pay a higher concession fee of 109 thousand euro calculated on
taxable income from the last two bimonthly period of 2007. The requested amounts were recorded on the credit side, paid in
2008 and at the same time disputed by the company while waiting to obtain realignments. Recently methods and counts have
been compared with AAMS and the company is confident that it will be able to define them in the amount of credit already
expressed in its books, also in consideration of the outcome of expert reports on the counting methods used by the company.
Payables due to AAMS for 1,200 thousand euro are related to weekly balances not yet collected by AAMS due to movements in
events outcome contests.
The balance of payables due to others is mainly composed of the payable for the Slot Machine fee related to the NovemberDecember 2007 bimonthly period.
The deferred income item totalling 915 thousand euro mainly refers to the amount not yet accrued of income invoiced ahead of
time for the sale of the option right.
30. ACCOUNTS PAYABLE
The table below shows the breakdown of accounts payable:
thousands of euro
31.12.07
31.12.06
Change
37,633
1,139
174
-5,838
-1,445
150
395
43
49
32,300
37,894
1,288
1
-6,094
-1,248
0
20
43
0
31,904
-261
-149
173
256
-197
150
375
0
49
396
Current accounts payable
- suppliers
- stables, jockeys and bookmakers
- foreign suppliers
- advances to suppliers
- credit notes to be received
- due from sister company Connext S.r.l.
- due from sister company Teleippica S.r.l.
- due from sister company Tivu+ S.p.A. in liquidation
- due from parent company SNAI Servizi S.r.l.
Total
pag
187
31. FINANCIAL COMMITMENTS
The sureties issued total 226,975 (152,646) thousand euro and refer to:
-
-
35,389 (27,376) thousand euro to sureties issued by various banks to AAMS, requested for the legal gaming concession for
entertainment machines, to back the fifteen day payment of the PREU balance and concession payment as required by article
20 paragraph 4 of the Concession due 31 October 2011;
1,463 (1,463) thousand euro for sureties issued in favour of Cassa di Risparmio Firenze for Teleippica S.r.l., to back a loan
signed by the sister company;
3,095 thousand in for UNIRE to back transfer of the concession for accepting bets for the concessions 175-341-95-345-438446-170-408-340-215.
1,113 (1,235) thousand euro for the AAMS to back the transfer of the concession for accepting bets for concessions 16251521-1500-1627.
203 thousand euro surety for AAMS to back payment of the instalment related to the payables accrued by the licensee due to
the tax authority and Italian Olympics Committee for the concessions 223-465-1258-3702-3539.
344 thousand euro surety for AAMS to back sports concession obligations for concessions 223-465-1258-3702-3539.
90 thousand euro surety for AAMS to back horse race concession obligations for concession 1258.
111 thousand euro surety for AAMS, issued by Ifinc S.p.A., for the concession for accepting horse race and sports bets;
203 (203) thousand euro for the municipality of Milan for building permits;
490 (137) thousand euro surety for the Ministry of Economic Development of back prized promoted for the prize contests;
20 thousand euro for Fiorentina Gas to back the gas supply contract;
93 (261) thousand euro surety for UNIRE, to back the UNIRE investment fund grant for the Milan and Montecatini race tracks;
123 (123) thousand euro surety for UNIRE, to back contractual obligations for the new convention;
3 thousand euro surety issued by Banca Popolare di Milano for Enel to back electricity supply;
25,806 (25,806) thousand euro surety for UNIRE, to back the concession obligations related to Horse Racing Concessions;
7,585 (7,585) thousand euro surety for UNIRE, to back the structural loan
related to Horse Racing Concessions;
12,644 (14,906) thousand euro surety for AAMS, to back payment obligations for accrued payables for Sports Concessions;
45,890 (11,500) thousand euro surety for AAMS,to back opening of horse race gaming shops and corners and activation
of remote horse race gaming;
45,640 (14,750) thousand euro surety for AAMS, to back opening of sports gaming shops and corners and activation of
remote sports gaming;
17,402 (15,750) thousand euro surety for AAMS, to back correct execution of Sports Concession obligations;
7,630 (7,630) thousand euro surety for AAMS, to back correct execution of Horse Racing Concession obligations;
16,620 (7,630) thousand euro surety for AAMS, to back payment obligations for accrued payables for Horse Racing
Concessions;
18 (18) thousand euro surety for Esselunga S.p.A. , to back the obligations under a sublet contract.
5,000 thousand euro surety for AAMS, to back obligations assumed with the submission of an application to participate in
the selection for awarding the operating concession and development of national totalisator numeric games.
The group has undertaken commitments for operating leases of computerised equipment mainly used to operate the gaming network
and terminals for accepting horse racing and sports bids for 21,263 (12,872) thousand euro of which with remaining payable
within 12 months for 6,932 thousand euro, more than 12 months but less than 5 years for 13,891 thousand euro and 331
thousand euro beyond 5 years.
During the first half of 2006 the group obtained a loan for the acquisition of “Concession” company branches, against which the
following guarantees were issued:
- First mortgage issued by SNAI S.p.A. in favour of Unicredit on 16 march 2006 on the race tracks of Milan, Montecatini and
the Headquar ters in Porcari (LU), value 193,000 thousand euro, Notar y Public Cambareri File;
- Second mortgage issued by SNAI S.p.A. in favour of Unicredit on 16 March 2006 on the race tracks of Milan, Montecatini,
value 340,000 thousand euro, Notary Public Cambareri File;
- Third mortgage issued by SNAI S.p.A. in favour of Solar S.a. on 16 march 2006 on the race tracks of Milan, Montecatini
and the Headquarters in Porcari (LU), value 87,000 thousand euro, Notar y Public Cambareri File;
- First pledge on Equity Investment Festa S.r.l. issued on 16 March 2006 by SNAI S.p.A. in favour of Unicredit, value 1,000
thousand euro, Notary Public Cambareri 16093;
- First pledge on Equity Investment Immobiliare Valcarenga S.r.l. issued on 16 March 2006 by SNAI S.p.A. in favour of Unicredit,
value 51 thousand euro, Notary Public Cambareri 16094;
- First pledge on Equity Investment Mac Horse S.r.l. issued on 16 March 2006 by SNAI S.p.A. in favour of Unicredit, value
26 thousand euro, Notary Public Cambareri 16092;
- First pledge on Equity Investment Teleippica S.r.l. issued on 16 March 2006 by SNAI S.p.A. in favour of Unicredit, value 495
- Second pledge on Equity Investment Festa S.r.l. issued on 16 March 2006 by SNAI S.p.A. in favour of Solar S.a., value 1,000
- Second pledge on Equity Investment Immobiliare Valcarenga S.r.l. issued on 16 March 2006 by SNAI S.p.A. in favour of
Solar S.a., value 51 thousand euro, Notary Public Cambareri 16097;
pag
188
-
-
-
Second pledge on Equity Investment Mac Horse S.r.l. issued on 16 March 2006 by SNAI S.p.A. in favour of Solar S.a., value
Second pledge on Equity Investment Teleippica S.r.l. issued on 16 March 2006 by SNAI S.p.A. in favour of Solar S.a., value
First pledge issued by SNAI S.p.A. in favour of Unicredit on current accounts in the name of SNAI S.p.A. as listed below:
First pledge issued by the subsidiaries Festa S.r.l. and Mac Horse S.r.l. in favour of Unicredit on current accounts in their names.
Second pledge issued by SNAI S.p.A. in favour of Solar S.a. on current accounts in the name of SNAI S.p.A. as listed below:
Second pledge issued by the subsidiaries Festa S.r.l. and Mac Horse S.r.l. in favour of Solar S.a. on current accounts in their
names.
First pledge issued on 16 march 2006 by SNAI S.p.A. in favour of Unicredit Banca d’Impresa S.p.A. on 39 trademarks and
2 patents owned by the company, Notary Public Cambareri file 16099;
Second pledge issued on 16 March 2006 by SNAI S.p.A. in favour of Solar S.a. on 39 trademarks and 2 patents owned
by the company, Notary Public Cambareri file 16100.
On 20 October 2006 the group obtained Waivers from the lenders to be able to sign a contract for a line of credit for guarantees
of ¤140,000,000.00 needed for the call for tenders for new bet acceptance licences based on Italian Legislative Decree 223
of 04.07.2006. This line of credit was used to issue definite sureties of ¤45,640,000.00 and ¤45,890,000.00 as specified
above. On 27 September 2007 Waivers were obtained from the lenders to sign a new contract for a line of credit for guarantees
of ¤305,000,000.00.
On 27 September 2007 a contract was signed with a leading bank for this line of credit, aimed at SNAI S.p.A.’s participation
as a candidate in the selection procedure for awarding the concession to run and develop national totalisator numeric games.
On the same date a surety was issued for ¤5,000,000.00, as described above, which is now extinguished.
On 27 December 2007, based on a decision from the Court of Lucca, a distraint was issued in favour of Vision Srl on c/a Cassa
Risparmio Lucca Pisa Livorno for a sum totalling ¤250,000.00.
pag
189
32. RELATED PARTIES
The Consob communication no 6064293 of 28 July 2006 requires that, in addition to what is required by the international
accounting standard related to “Disclosure of related party transactions” (IAS 24) the information be provided on the incidence
which transactions or positions with related parties, as classified by the same IAS 24, have on the profit, loss, asset, liability and
financial situation.
The table below shows these incidences. The incidences which the transactions have on profit and loss as well as cash flow of
the company and/or Group need to be analysed considering that the main transactions existing with related parties are all identical
to the equivalent contracts existing with third parties: therefore in the current situation there is no difference in treatment between
related parties and third parties.
commercial or financial nature, and for services of an administrative, financial and tax consultation, tax and organisation nature
with subsidiaries and contracts with the parent company SNAI Servizi S.p.A. for legal assistance services and for regulation of
the financial current account.
The transfer prices are related to active sales prices to the betting collection chain (i.e. market prices); purchase costs for services
governed by commercial contracts use market prices and conditions as a reference for contracts of a financial nature and operating
costs for services and performance for the other buying and selling of inter-group services.
The contracts, including services supplied by some subsidiaries for other group companies, as well as those supplied by SNAI
S.p.A. to other group companies and performance of services between operating companies, are formalised and invoiced with
multi-year frequency.
The group performs services for the concessionaries of horse racing agencies and sports agencies, as explained above.
Many licensees hold minority interests in the share capital of the parent company SNAI Servizi S.r.l. Transactions, in standardised
contracts, are governed at market conditions completely identical to those of third par ty licensees.
The acquisition transaction of the company branches occurring on 16 March 2006 is basically the result of a transaction with
related parties since most of the company branches acquired by SNAI S.p.A. were directly or indirectly referable to members of
the SNAI S.p.A. board of directors, who were owners, directly or indirectly, through the companies they hold investments in or
which are under their families.
In particular of the 450 transferred branches, 236 branches were under the aforesaid subjects, 301 branches under shareholders
of the parent company SNAI Servizi S.r.l. and 2 branches the subsidiary Festa S.r.l. The total number of acquired company branches
by related parties was 365.
By application of article 2391-bis of the Italian Civil Code and recommendations of the self-governance code, the company relied
on the consultation of independent experts, asking for a Fairness Option, which confirmed the congruity of the amount paid by
the company to acquire the company branches, directly or indirectly attributable to the directors.
The amount paid to the directors totalled 204.9 million euro, that to the shareholders of the parent company SNAI Servizi S.r.l.
256.3 million and that related to the subsidiary 0.69 million euro. The sum of the amounts paid to related parties for a total of
302.8 million euro represents 84.46% of the total amount paid.
The clauses in the company branch acquisition contracts, as well as those for management and service contracts, with counterparts
being the shareholders of the parent company are completely identical to similar contracts with third parties. With the company
branch acquisition SNAI S.p.A. also signed management contracts, to use services connected with operational management of
the corner, with gaming acceptance corner which transferred the concessions.
The payment was in line with the total volume of bets collected for all the acquired company branches with the same percentage
used for concession company branches acquired from third parties that are not shareholders of the parent company SNAI Servizi
S.r.l.
The same contractual conditions applied to third parties were also applied to the shareholder managers of the parent company
SNAI Servizi S.r.l.
The table below summarises the following:
the amount of accounts receivable for services and products and receivables for the collection of horse race and sports bets, for
Ippica nazionale betting, event outcome contests and entertainment machines, which existed at 31 December 2007 and 31
December 2006 between SNAI S.p.A. and the other group subsidiaries with shareholders of the parent company SNAI Servizi
S.r.l., to whom the same companies supply ser vices within the framework of their institutional activities;
the amount of financial receivables; the amount of accounts payable and financial payables.
It is important to note that some directors of the group companies are also shareholders of the parent company SNAI Servizi S.r.l.,
although they do not hold significant or controlling shareholdings.
pag
190
thousands of euro
Accounts receivable:
31/12/2007
incidence %
3.734
2
37
19
3.792
6,53%
0,00%
0,00%
0,06%
0,03%
6,62%
Other non-current assets:
Other current assets:
Current financial assets:
- due from SNAI Promotion S.r.l. in liquidation
- due from La Televisione S.r.l. in liquidation
- due from Ristomisto S.r.l. in liquidation
- due from Teseo S.r.l. in liquidation
Total receivables
-
Total payables
41
3
3.258
6,16%
0,01%
0,00%
0,08%
0,01%
6,26%
383
383
18,60%
18,60%
12,04%
0,00%
0,00%
2,12%
14,16%
3.241
478
3.719
19,12%
0,00%
0,00%
2,82%
21,94%
74
874
308
1.665
1.724
4.645
13.297
0,37%
4,39%
0,00%
1,55%
8,37%
8,67%
23,35%
11,94%
29
133
122
119
1.211
1.478
3.092
10.452
0,93%
4,28%
3,92%
3,83%
38,95%
47,54%
99,45%
14,08%
268
150
49
43
395
905
0,83%
0,46%
0,15%
0,13%
1,22%
2,79%
769
478
43
20
1,310
2,41%
1,50%
0,00%
0,13%
0,06%
4,11%
303
303
0,50%
0,50%
14.426
14.426
4,60%
4,60%
18,639
18,639
5,95%
5,95%
5.527
5.527
21.161
41,30%
41,30%
4,86%
32,876
32,876
52,825
77,21%
77,21%
13,61%
Other current liabilities
Current financial liabilities:
- due to SNAI Servizi S.r.l. shareholders for extension
of company branch acquisitions (vendor loan)
3.208
6
incidence %
4.132
1
727
4.860
Accounts payable:
- due to Connext S.r.l.
- due to Tivu+ S.p.A. in liquidation
- due to Teleippica S.r.l.
Non-current financial liabilities:
- due to SNAI Servizi S.r.l. shareholders for extension
of company branch acquisitions (vendor loan)
0,00%
31/12/2006
-
0,00%
-
The financial receivables are recorded net of the specific bad debt provision.
The table below shows:
- the income for services and products and services performed for the collection of horse race and sports bets, for ippica nazionale
betting, event outcome contests and amusement machines, which existed at in 2007 and 2006 between SNAI S.p.A. and other
group subsidiaries with shareholders of the parent company SNAI Servizi S.r.l., to whom the same companies supply services within
the framework of their institutional activities;
- financial income;
- the costs for services and charge backs, costs related to amusement machines, existing in 2007 and 2006 between SNAI S.p.A.
and the other group subsidiaries with the shareholders of the parent company SNAI Servizi S.r.l., for whom the same companies
supply services within the framework of their institutional activities.
- costs for interest and fees.
pag
191
thousands of euro
Revenue from sales and services:
2007
incidence %
2006
incidence %
8.975
82
9.057
1,82%
0,02%
1,84%
11.681
88
11.769
5,37%
0,04%
5,41%
178
4
9
375
566
3,09%
0,07%
0,16%
6,52%
9,84%
186
217
423
826
3,55%
4,14%
0,00%
8,06%
15,75%
325
3
82
178
151
158
897
10.520
6,94%
0,00%
0,06%
1,75%
3,80%
3,22%
3,37%
19,14%
2,03%
192
4
7
60
100
105
468
13.063
10,73%
0,22%
0,39%
3,35%
5,59%
5,87%
0,00%
26,15%
5,82%
170
170
0,00%
-
0,00%
0,00%
92
92
0,74%
0,74%
-
-
75.490
527
528
813
77.358
21,12%
0,15%
0,00%
0,15%
0,23%
21,65%
63.153
460
888
346
64.847
49,45%
0,36%
0,00%
0,70%
0,27%
50,78%
125
0,72%
0,00%
0,72%
122
30
152
0,63%
0,15%
0,78%
3,18%
0,00%
0,00%
3,18%
18,39%
2.099
76
278
2.453
67.452
6,92%
0,25%
0,92%
8,09%
37,87%
Other revenue – Revenue from services, charge
backs and rents:
- from Connext S.r.l. associate
Interest income:
- from SNAI Promotion S.r.l. in liquidation
- from La Televisione S.r.l. in liquidation
- from Ristomisto S.r.l. in liquidation
Total revenue
Costs to purchase semi-finished goods
Costs for used raw materials and consumables
Costs for services and charge backs:
Cost for personnel posted to other areas:
125
Interest expense and fees
Imputed financial charges on vendor loan due to
SNAI Servizi S.r.l. shareholders
1.363
Fees on sureties/interest expense from SNAI Servizi S.r.l.
Interest expense due to Teleippica S.r.l.
1.363
Total costs
79.108
-
33. FINANCIAL RISK MANAGEMENT
The Group has financial liabilities which are mainly composed of bank loans, loans granted by others (e.g. vendor loan, etc.) and
finance and operating lease contracts. These contracts are medium and long term, in part not remunerated. These liabilities were
undertaken based on important strategic development operations planned and implemented in 2006 and 2007 in order to acquire
new concession company branches and new licences to consolidate and implement the company’s presence in its market. A
decision was also made to increase the Share Capital of SNAI Spa, concluded in January 2007, used to obtain financial resources
for 249,961 thousand euro, to use to support the investments necessary for the development plan and permit sufficient cash
autonomy and flexibility.
The Group’s policy is to reduce the use of burdensome credit to back ordinary operations, reduce the time for collecting accounts
receivable, programme times and extension instruments for accounts receivable and plan and diversify the payment methods for
investments.
pag
192
Credit risk
In order to reduce and monitor credit risk Gruppo SNAI has adopted suitable organisational policies and instruments. The Group
is familiar with and knows the company’s debtors (customers, manager of gaming shops and corners, etc.) very well, thanks to its
consolidated and many years of presence in all market segments it targets, characterised by a limited number of participating
operators.
New potential relations, following the assignment of the “Bersani” call for tender licences, mainly come form already known
commodity segments, with more limited and fractioned volumes, thus with lower potential risks.
Potential income related transactions are always previously subjected to a reliability analysis using the aid of information from
leading specialised companies. The obtained analyses are appropriately supplemented with objective and subjective elements,
deemed useful and already available within the Group, generating a reliability assessment.
A high percentage of income relations are previously covered by sureties or security deposits, issued in favour of the Group based
on the characteristics determining the reliability assessment. Established relations are constantly and regularly monitored by a structure
specifically dedicated for this function, connected to other interested and involved functions. The extremely brief timeframe of
collections, generally weekly or fortnightly, makes it possible to reduce the risk, in part thanks to the collection method by direct
debiting.
In some income relations the credit risk is limited by adopting special measures, such as suspension of the service in short timeframes,
until settlement of the position.
Payment extensions, by means of written agreements and application of interest on the extension and with issue of notes (in almost
all cases) are only allows in extremely limited and circumspect cases, after previous evaluation and manager’s authorisation.
Receivables are subject to an analytical assessment on a regular basis.
The risk concerning other financial assets of the Group is extremely limited.
Interest rate risk
The Group has signed some loan contracts, mainly at a variable rate; some of these contracts entail extensions which are not
remunerated. The liquid assets and significant cash flow generated by the core business, treated by parameterising the interest
income rate to euribor trend, thus limiting the risk of changes in interest rate resulting from loan contracts at a variable rate also
parameterised to euribor, mostly at three months. The centralised management of the Group’s cash flow, by using inter-group current
accounts, make it possible to optimise cash management and reduce risks and charges at the same time, maximising financial
proceeds.
Liquidity risk
The Group, and the parent company in particular, are required to manage incoming and outgoing cash flow (e.g. Preu, Single
Tax on bets, bonuses, etc.) in very short and pre-established timeframes both for incoming and outgoing. Thus the Group possesses
a fair liquidity and controls liquidity risk by means of various management policies.
Extensions on collections are reduced to a minimum, by adopting adequate timeframes and instruments which are under direct
control of the Group.
The management of orders to creditors entails a preliminary planning stage aimed at diversifying payment instruments and searching
for the broadest and least burdensome timeframes.
In the presence of investments the policy adopted by the Group has determined a prudential approach aimed at dividing payments
in the medium period, in order to maintain flexibility with cash flows. The use of financing is planned and instrumental to the
realisation of investments.
Foreign exchange risk
There is no transaction, worthy of note, that can generate risks connected with currency fluctuations.
Share capital management
Management of the Group’s share capital is aimed at guaranteeing a sold credit rating and adequate levels of capital indicators
to support the industrial activities and investment plans. The Group, within the limits allowed by the contractual conditions of existing
loans, can pay dividends to shareholders and issue new shares.
Group has analysed its capital using a debt/capital ratio, or comparing net debt to total capital plus net debt. The group’s policy
aims at keeping the ratio between 0.3 and 1.0. This aim takes into account some equity and borrowing parameters used to
calculate the covenants.
pag
193
thousands of euro
2007
2006
Interest-bearing loans
Non interest-bearing loans
Financial liabilities
317.951
27.740
345.691
299.464
68.764
368.228
Accounts payable and other payables
106.639
106.740
Net payables
-19.890
-93.087
339.353
-3.109
-262.821
209.038
Convertible bonds
Capital
Total capital
333.686
333.686
323.657
323.657
Capital and net payables
673.039
532.695
50%
39%
Capital/Debt Ratio
34. SIGNIFICANT NON-RECURRING EVENTS AND TRANSACTIONS
There are non-recurring revenue and cost items in 2007.
Revenue
Compared to previous years a certain number of settlements have become recurring connected with former customer licensees who
in past used the company’s provider services. Most of the disputes have been submitted to arbitration boards appointed by the
parties by applying a specific contractual clause. The settlement of the arbitration hearings has been resulting in revenue in favour
of the company reflected in the income statement in manner that has become repetitive. Therefore a decision was made not to
consider this revenue as having a one time nature.
Costs
During 2007, as described above, non-recurring costs were incurred for one time transactions, since they have all the characteristics
of non-recurrence. These include costs incurred for:
-
-
start-up of the debt renegotiation procedure (services for 536 thousand euro).
for participation in the call for tenders for awarding the concession to run and develop national totalisator numeric games, cocalled Superenalotto (services for 2,451 thousand euro and financial charge for issue of sureties for 1,098 thousand euro).
The outcome of the call for tenders, published in January 2008, did not see the company classified in first place.
Additional accruals to the provision for risks for 4,810 thousand euro to face the greater risk resulting from some contractual
relations, including transferred and disputes which have arisen as well as for the coverage of charges resulting during the
liquidation of some equity investments.
thousands of euro
2007
Performance of services
Financial charges
2.987
4.810
1.098
incidence %
0,84%
15,36%
2,56%
35. POSITIONS OR SETTLEMENTS RESULTING FROM ATYPICAL AND/OR UNUSUAL
TRANSACTIONS
At 31 December no atypical and/or unusual transactions had occurred.
36. GROUP ENTITIES
Group control
The parent company SNAI S.p.A. is controlled by SNAI Servizi S.r.l.
pag
194
Significant equity investments in subsidiaries
Percentage held
31/12/2007
31/12/2006
100
100
100
100
100
100
100
100
IMMOBILIARE VALCARENGA S.r.l.
FESTA S.r.l. unipersonale
Mac Horse S.r.l. unipersonale
The complete composition of the group and adopted consolidation methods are described in attachment 1.
37. NET FINANCIAL POSITION
The table below shows the net financial position as required by Consob based on article 16 of the Financial Act and article 114,
paragraph 5 of Legislative Decree 58/98.
thousands of euro
31.12.2007
31.12.2006
83
93.004
92.978
26
1
93.088
19.889
74
2.032
2.539
15.238
107
262.714
262.694
20
1
262.822
3.108
30
1.719
1.343
31.12.2007
6
18.820
13.383
31.12.2006
16
7.590
5.793
32.203
80.774
225.908
41.746
833
54.710
211.220
145
242.328
A. Cash
B. Other liquid assets
bank
postal c/a
C. Securities held for sale
D. Liquid assets (A) + (B) + (C)
E. Current financial receivables
- financial c/a due from parent company
- financial c/a due from subsidiaries
- financial c/a to companies subject to control by the same parent company
thousands of euro
F. Current accounts payable due to banks
G. Current part of noncurrent borrowing
H. Other current financial payables:
I. Current financial borrowing (F) + (G) + (H)
J. Net current financial borrowing (I) - (E) -(D)
K. Noncurrent financial assets: BTP 5% due 01.05.08
L. Noncurrent accounts payable due to banks
M. Bonds issued
N. Other noncurrent payables:
O. Noncurrent financial borrowing (L) +(M) + (N)
P. Noncurrent net financial borrowing (O) - (K)
Q. Net financial borrowing (J) + (P)
-
87.580
67.430
20.150
313.488
313.488
232.714
12.131
42.579
-
71.190
44.172
27.018
313.518
313.373
102.153
Compared to 31 December 2006 net financial borrowing increased by 130,561 thousand euro as the combined effect from
flows resulting from core operations and disbursements. The most significant items include:
- payment of 113,945 thousand euro to AAMS for awarding of 1,206 sports licences (342 shops and 864 corners) and 3,886
as well as the awarding of a concession for remote horse race gaming and one for sports, following the participation in the call
for tenders called by the Ministry of the Economy and Finance to apply the Bersani decree.
pag
195
-- collection of 4,049 thousand euro related to the conclusion of the share capital increase;
- payment of 60,920 thousand euro for payables related to the acquisition of Concessions;
- payment for the procurement of goods and machines for setting up the new Bersani call for tenders points of sale for a total of
24,940 thousand euro;
- repayment of the first loan tranche, tranche A, required by the Senior contract, for 13,000 thousand euro.
37.1 Financial commitments (Negative pledges)
See paragraph 31 “financial commitments” for a detailed description of the pledges and sureties issued by the parent company
and group equity investments.
37.2 Covenants
As is customary with this type of loan, the existing Loan Contracts described above entail a series of obligations for the Company
which are substantially the same for both Senior and Junior Loan Contracts.
The company has made a commitment to the lenders to comply with a series of financial parameters mainly connected to the trend
of EBITDA on a consolidated level and total net borrowing of the company.
In accordance with the loans – “Senior Loan” and “Junior Loan” the Group is obligated to comply with the following financial
covenants related to Gruppo SNAI, which will be verified quarterly on a continuous year basis (compared to the twelve months),
starting from the six month period closed at 30 June 2006:
Test Date
31
31
30
30
31
31
30
30
31
31
30
30
31
31
December 2007
March 2008
June 2008
September 2008
December 2008
March 2009
June 2009
September 2009
December 2009
March 2010
June 2010
September 2010
December 2010
March 2011
EBITDA
(in millions
of euro)
61,1
61,9
62,7
63,5
64,3
65,0
65,6
66,3
66,9
67,5
68,0
68,5
69,0
69,3
Ratio between
Adjusted Net
Total Borrowing
and EBITDA
5,3
5,1
4,9
4,6
4,4
4,2
4,0
3,8
3,5
3,3
3,2
3,0
2,8
2,6
Ratio between
Net Total
Borrowing
and EBITDA
3,9
3,6
3,7
3,5
3,4
3,1
3,2
3,0
2,9
2,7
2,7
2,5
2,4
2,3
Fixed
Charge
Coverage
0,7
0,6
0,6
0,8
0,8
0,7
0,7
0,8
0,8
0,7
0,7
0,7
0,7
0,2
LEBITDA is defined in the loan contract and indicates the consolidated result before interest, taxes, depreciation and accruals and
all the extraordinary and non-recurring items.
The values at 31 December 2007 are still significantly influenced by the share capital increase transaction, which was completed
15 January 2007, participation on the call for tenders for awarding of the so-called Bersani points of sale and consequent cash
flow for opening of the new points of sale: the count prepared for application of the covenants, taking into account the previous
phenomena, does not deviate from the contractual parameters.
It is important to note that 20 October 2006 a waiver was obtained allowing SNAI to obtain signatory credit for 140 million
euro, aimed at participation in the call for tenders for 16,300 new points of sale (gaming shops and corners) for horse racing
and sports bets, as well as a consequent increase in capital for a total of around 250 million euro, to use to finance obligations
consequent to this call for tenders.
The contractual novation made it possible to participate in the call for tenders which resulted in the awarding of a total of 5,094
licences and guarantees sufficient flexibility for management of existing activities as well as those resulting from opportunities offered
to the group both by direct management of the new licences and expansion as a provider and supplier of services and machines,
with broad margins on the covenants still in existence.
An additional waiver was obtained by SNAI S.p.A. 25 September 2007 to allow the acquisition of signatory credit for an additional
305 million euro, aimed at participation in the call for tenders for totalisator numeric games (so-called superenalotto).
ulteriori 305 milioni di euro, finalizzati alla partecipazione alla gara per i giochi numerici al totalizzatore (cd superenalotto).
pag
196
38. FINANCIAL INSTRUMENTS
Below is a comparison of the carrying amount and of the fair value per category for all the financial instruments
of the Group.
Financial assets and liabilities
Cash flow
Credits
carrying amount
31.12.07
31.12.06
93.087
57.182
19.890
13.383
18.820
13.874
262.821
52.106
3.109
42.579
12.131
19.569
31.12.07
93.087
57.182
19.890
13.383
18.820
13.874
fair value
31.12.06
262.821
52.106
3.109
42.579
12.131
19.569
39. SIGNIFICANT EVENTS AFTER CLOSING OF THE PERIOD
39.1 Superenalotto call for tenders result
For detailed information see the specific paragraph in the directors’ report.
Other information
In compliance with the obligations introduced by Legislative Decree no. 6/2003 regarding corporate governance and specifically
with the introduction of articles 2497-2497 septies concerning “company management and coordination” Gruppo SNAI has
indicated and made public, in the manner and form indicated by article 2497 bis of the Civil Code that the parent company SNAI
Servizi S.r.l. with registered office in Mantua – Viale Italia 19 – is the subject which exercises management and coordination
activities for Gruppo SNAI.
In order to comply with the accounting information obligations on the management and coordination activity indicated by article
2497 bis, paragraph 4, the data from the last approved financial statements of SNAI Servizi S.r.l., closed at 31 December 2006,
are shown in attachment 4 to the parent company notes.
These explanatory notes are integrated with the information provided in the attachments:
Composition of Gruppo SNAI at 31.12.07
The attachment are an integral part of these notes and constitute additional information and description of the financial statement
items in question.
The financial statements of the consolidated subsidiaries and associates are expressed in euro.
These financial statements represent a true and correct view of the equity and financial situation as well as the profit/loss for the
financial year and correspond to the figures reported in the accounting records.
The Chairman
(Maurizio Ughi)
Porcari, 28 March 2008
*****
The manager assigned with preparation of accounting and corporate documents, Luciana Garza, declares in accordance with
paragraph 2 article 154 bis of the Finance Act that the accounting information contained in these consolidated financial statements
corresponds to document results, books of account and accounting entries.
pag
197
pag
198
LUXEMBOURG
PISA
- Solar S.A.
- ALFEA S.p.A.
LUCCA
ROME
PORCARI
ROME
- CONNEXT S.R.L.
- TELEIPPICA S.r.l. ( former SOGEST Società
Gestione Servizi Termali Srl)
- LEXORFIN Srl
OTHER COMPANIES:
ROME
PALERMO
- SOCIETA’ GESTIONE CAPANNELLE SPA
ASSOCIATES:
- RISTOMISTO Srl in liquidation
MILAN
PORCARI
PORCARI
PALERMO
MILAN
SUBSIDIARIES:
- Società TRENNO S.r.l. unipersonale
- IMMOBILIARE VALCARENGA Srl unipersonale
- FESTA Srl unipersonale
- Mac Horse Srl unipersonale
- TESEO Srl in liquidation
PORCARI
REGISTERED OFFICE
- SNAI S.p.A.
NAME
ATTACHMENT 1
Composition of Gruppo SNAI at 31 December 2007
(thousands of euro)
Gruppo SNAI
PERCENTAGE
HELD
1.500
2.540
82
520
31
996
1.956
50
51
1.000
26
1.032
1.932
2,44%
19,50%
15,00%
19,50%
30,00%
30,70%
26,67%
100,00%
100,00%
100,00%
100,00%
70,00%
100,00%
60.749 PARENT COMPANY
SHARE
CAPITAL
(13)
(12)
(10)
(11)
(8)
(9)
(7)
(6)
(2)
(3)
(4)
(5)
(1)
LINE-BY-LINE
CONSOLIDATION
METHOD/
MEASUREMENT
POLICY
DISTRIBUTION OF INFORMATION AND EVENTS BY USE OF ALL MEDIA
ALLOWED BY TECHNOLOGY AND CURRENT AND FUTURE LAWS
WITH THE EXCEPTION OFNEWSPAPER PUBLICATION
FINANCIAL FOR EQUITY INVESTMENTS IN HORSE RACING SEGMENT
HISTORIC
HISTORIC
HISTORIC
HISTORIC
SALES AND ASSISTANCE FOR IT, HARDWARE AND SOFTWARE SERVICES
MULTIMEDIA AND PRODUCTION ACTIVITY, COLLECTION AND
DISSEMINATION OF TELEVISION SIGNAL
ORGANISATION AND CONDUCTING OF HORSE RACES
AND TRAINING CENTRE
FINANCIAL
ORGANISATION AND CONDUCTING OF HORSE RACES
AND TRAINING CENTRE
ORGANISATION AND CONDUCTING OF HORSE RACES AND
TRAINING CENTRE
LINE-BY-LINE
RENTAL OF HORSE RACING COMPANY FOR STABLING HORSES
LINE-BY-LINE
MANAGEMENT OF CALL CENTRE, HELP DESK AND COMPUTERISED BETS LINE-BY-LINE
PUBLISHING INITIATIVES INCLUDING DIGITAL, ADVERTISING AND GRAPHICS LINE-BY-LINE
RESEARCH AND DESIGN OF BETTING MANAGEMENT
SOFTWARE SYSTEMS
RESTAURANTS, CREATION OF FRANCHISE CHAINS IN
FOOD SECTOR
ACCEPTANCE OF HORSE RACE AND SPORTS BETS WITH
OWN CONCESSIONS
– COORDINATION OF SUBSIDIARIES’ ACTIVITIES AND
COMPUTERISED DATA DISTRIBUTION MANAGEMENT AND SERVICES
FOR BETTING AGENCIES – COMPUTERISED MANAGEMENT OF
MACHINE CONNECTION NETWORK PARAGRAPH 6
ACTIVITY
pag
Equity investment held by Snai S.p.A.
Established on 30.12.99 with subscription by Snai SpA.
Acquired on 24 February 2004 by others.
Established on 13.11.96 and acquired by Snai SpA on 30.12.99. On 03/08/2001 Società Teseo Srl was put in liquidation.
Established on 25.01.2001; with the extraordinary shareholders’ meeting of 14/11/2001 its company name was changed from SNAI FOOD Srl to RistoMisto Srl.
With the extraordinary shareholders’ meeting of 07.05.02 its losses were covered, zeroing out and re-establishing the share capital. On 08/10/02 it was put in liquidation.
Equity investment held at 26.28% by Ippodromi san Siro S.p.A. (formerly Società Trenno SpA) merged with SNAI S.p.A. during 2006.
On 5 June 2007 the extraordinary shareholders’ meeting voted, among other things, to cover the losses up to 31 March 2007 and re-establish its share capital: following this transaction
the investment increased and is now 26.67%
Luxembourg company, established 10 March 2006 by SNAI S.p.A. for 30% and Irish company FCCD Limited for 70%.
Equity investment held at 30.70% by Ippodromi San Siro S.p.A. (formerly Società Trenno SpA) now merged with SNAI S.p.A.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
199
Acquired following the merger of S. Siro SpA on 25/11/97. On 26.04.2001 its company name changed from CRAI Srl to SNAI Way Srl. On 14/11/2001 SNAI SpA transferred
50% of the entire SNAI WAY share capital to Publitel.
The company was later transformed into an SpA. Following an out of court settlement Publitel returned the shares it held.
With the extraordinary shareholders’ meeting of 10.5.02 losses accrued to 31.3.2002 were covered by zeroing out share capital and re-establishing it at 670 thousand euro.
On 28.06.02 55% of its share capital was transferred. Snai S.p.A. did not separately subscribe the share capital increase voted by the extraordinary shareholders’ meeting of 28/06/02
therefore its holding decreased to 19.54% On 29/01/03 it changed its company name to TIVU + S.p.A. In the extraordinary shareholders’ meeting on 21 May 2003 SNAI S.p.A.
subscribed 19.50% of the re-established share capital at 520,000 euro.
On 7 July 2004 the extraordinary shareholders’ meeting voted to put Tivu + S.p.A. in liquidation.
(13) Acquired on 19.7.99 at 2.44% by Società Trenno S.p.A. later merged with SNAI S.p.A.
(12) Acquired by others on 5.5.2000. On 2/10/2003 the extraordinary shareholders’ meeting changed the company name from SOGEST Società Gestione Servizi Termali S.r.l. to TELEIPPICA
S.r.l. and the company’s scope.
During 2005 the extraordinary shareholders’ meeting voted to increase the share capital to 2,540,000 euro. The holding did not change.
(11)
(10) The equity investment in Connext Srl was acquired on 7.12.2000 by acquiring the option rights from previous shareholders and later subscription and payment for increase in reserved
share capital
The equity investment held at 100% by SNAI S.p.A. due to the merger with Ippodromi San Siro S.p.A. (formerly Società Trenno S.p.A.)
The company was established on 27 July 2006 and on 15 September 2006 the company Ippodromi San Siro S.p.A. transferred its “horse race management” branch to Snai S.p.A.
(1)
NOTES TO THE COMPOSITION OF GRUPPO SNAI
Certification of the consolidated financial statements in accordance with article 81 – ter of Consob Regulation no. 11971 of 14
May 1999 et seqq.
1. The undersigned Maurizio Ughi as Chairman and Luciano Garza as manager in charge of preparing the accounting and
corporate documents of SNAI S.p.A. hereby certify, taking into account the provisions of article 154-bis, paragraphs 3 and 4 of
Legislative Decree no. 58 of 24 February 1998:
• the adequacy in relation to the enterprise characteristics and
• effective application
of the administrative and accounting procedures to prepare the consolidated financial statements at 31 December 2007.
2. To this end, it is important to note that Gruppo SNAI has started a rationalisation, integration and formalisation activity of the
administrative-accounting procedures and consolidated practices which compose all of the processes involved in preparing the
financial statements based on methods generally recognised on an international level, in particular using the “Internal Control –
Integrated Framework” models issued by Committee of Sponsoring Organizations of the Treadway Commission (so-called “CoSO
report”) and “Control Objectives for Information and related Technology (so-called Cobit)” as a reference which represent the
standards for the internal audit system generally accepted on an international level.
3. Moreover, we certify that the consolidated financial statements:
a. correspond to the books of account and accounting records;
b. are prepared in compliance with the International Financial Reporting Standard adopted by the European Union as well as
the provisions issued to implement article 9 of Legislative Decree no 38/2005 (transposing European Union Regulation no. 1606
of 19 July 2002), and to the best of our knowledge it is suitable for providing a true and correct representation of the equity,
economic and financial situation of the issuing company and all of the companies included in the consolidation.
This certification is also prepared in accordance with article 154-bis, paragraph 2 of Legislative Decree no. 58 of 24 February
1998.
Porcari (LU), 28 March 2008
The Manager in charge
of preparing
accounting documents
The Chairman
(Maurizio Ughi)
(Luciano Garza)
pag
200
Report of the board
of auditors
Naples - Umberto I Gallery
Report of the Board of Auditors on the Consolidated Accounts of the Snai Group to 31/12/2007
Report to Shareholders
The Board of Directors, in compliance with the statutory requirements, has drawn up the consolidated accounts to 31 December
2007, which is the end date of the financial year of the parent company and its subsidiaries.
The consolidated accounts to 31 December 2007 have been drawn up in accordance with the International Accounting Principles
(IAS/IFRS) applicable as at 31 December 2007, issued by the IASB, adopted by the European Commission in accordance with
the procedure contained in Art. 6 of Regulation (EC) No. 1606/2002 of the European Parliament and the Council of Europe of
19 July 2002 and in Legislative Decrees No. 38/2005 and No. 209/2005.
For the scope of the consolidation, please refer to the notes and explanations contained in the notes to the accounts.
The Auditors Reconta Ernst & Young S.p.a. stated in their report of 30 April 2008 that the consolidated accounts of Snai S.p.a.
have been drawn up with clarity and are a true and accurate representation of the asset and financial situation, the profit and
loss, the changes in net assets and the cash flow of the Snai Group for the financial year ending on 31 December 2007.
Further to this report, please refer to the report prepared by this Board of Auditors in relation to the accounts of the company Snai
S.p.a., which contains the information required by statute.
With respect to our competence, we would point out that the report on the operations and the notes to the accounts provide the
necessary information and are consistent with the results shown in the consolidated accounts.
Mantua, 30 April 2008.
THE BOARD OF AUDITORS
(Dr. Francesco Lerro)
Chairman
(Lorenzo Ferrigno, Accountant)
Permanent Member of the Board of Auditors
Dr. Alessandro Carlotti)
Permanent Member of the Board of Auditors
pag
203
Independent auditory firm’s
report on the consolidated
balance
Monreale – Cathedral Cloister
della Libertà'88, 9
552485050129 Firenze
Tel.(+39) 055 552451Piazza
Fax (+39)055
www.ey.com
REPORT OF THE AUDITING FIRM
in accordance with Article 156 of the Legislative Decree of 24.2.1998, No. 58
To the Shareholders
of Snai S.p.A.
1.
We have performed the accounting audit of the Consolidated Financial Statements, made up of the Balance Sheet, the
Income Statement, the Statement on the transactions of the net assets, the Financial Statement and the relative Explanatory
Notes of Snai S.p.A. and its subsidiaries (“SNAI Group”) ending 31 December 2007. The Administrators of SNAI S.p.A.
are responsible for the compilation of the Annual Report. We are responsible for the professional opinion given on the
Annual Report and is based on the audit.
2.
Our review was conducted according to the audit principles and criteria recommended by CONSOB. In conformity with
the aforementioned principles and criteria, the audit was planned and carried out in order to acquire every element necessary
to determine if the Consolidated Financial Statements are defective due to significant errors and if they appear, overall,
reliable. The audit procedure includes the study, based on sample verifications, of the probative elements in support of the
balances and the information contained in the Annual Report, as well as the evaluation of the pertinence and the correctness
of the accounting criteria used and the reasonableness of the estimates made by the administrators. We consider that the
work performed supplies a reasonable base for the expression of our professional opinion.
The Consolidated Financial Statements gives for comparative purposes the figures corresponding to the previous fiscal year.
As illustrated in the Explanatory Notes, the Administrators have modified the comparative figures relative to the Balance
Sheet of the previous fiscal year, which was audited by another auditor who issued the audit report on 27 April 2007.
These modifications concerned the criteria for the accounting of the funding stemming from the acceptance of the fixedodds betting. The terms of re-determination of the corresponding figures of the previous fiscal year and the information note
given in the Explanatory Notes, with regard to the modifications made to the aforementioned figures, have been reviewed
by us for the purpose of the opinion of the Consolidated Financial Statements for the fiscal year ending 31 December 2007.
3.
In our opinion, the Consolidated Financial Statements of Snai S.p.A. at 31 December 2007 conforms to the International
Financial Reporting Standards adopted by the European Union, as well as the provisions issued in implementation of Article
9 of Legislative Decree No.38/2005. Furthermore, it is compiled with clarity and represents truthfully and correctly the
net worth and financial situation, the profit and loss statement, the changes in net worth and the cash flow of the Snai Group
for the fiscal year ending on that date.
Registered Office: 00196 Roma-Via C.D. Romagnosi, 18/A
Corporate Capital ¤ 1.303.500,00 i.v.
Registered at the S.O. of the Business Register at the CC.I.A.A. of Rome
Tax ID and Registration No. 00434000584
VAT No.00891231003
Registered in the Register of Auditors at No. 70945 Published in the Official Journal
Suppl. 13 – IV Special Series of 17/2/1998
Registered in the Special Register of Auditing Companies
Consob at Progressive No, 2 deliberation No. 10381 of 16/7/1997
Independent auditors’ report on the consolidated financial statements
For a better understanding of the Consolidated Financial Statements, we bring your attention to the following information contained
in the Explanatory Notes:
4.
the “Earnings from sales and services” include Euro 8.940 thousand for the gathering of 0,5% of the sums played with
the slot machines (slot machines), as compensation in favor of the agents of the telecommunications network, as required
by Article 1, paragraph 530, letter c) of the Law 266/2005. Relative to this compensation, the Autonomous Administration
of Monopolies of State (”AAMS”) has not yet adopted the provisions required by the aforementioned regulation for the
determination of said contribution. The Administrators, having verified the existence for their own telecommunications network
of the technical parameters defined by the law in question, proceeded with the its determination supported by the evaluations
of their own outside consultants.
Florence, 30 April 2008
Filippo Maria Aleandri
(Partner)
pag
208
L’aquila – The Fountain of 99 Spouts
Venice – St. Mark’s Square

Reports and Financial Statements as of 31

Transcription

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